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This document discusses pricing strategies and factors that affect pricing. It begins by defining price and the role of pricing in marketing strategy. It then provides examples of skimming pricing and penetration pricing strategies used by companies like Apple, Sony, and Maybelline. The document also discusses how pricing can be used as a demand regulator, revenue generator, competitive tool, and for product positioning. Finally, it outlines internal factors like marketing objectives and costs, and external factors like demand, competition, and the market that affect pricing decisions.

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1 Pricing Indian Institute of 12/18/2012 Management Raipur Adarsh 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 a product. It can also be defined as everything that a customer has to give up in order to acquire a product or service.
3 Role 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 Raipur Marketing 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
5 Apple 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 Raipur Sony launched HDTV Bravia at a high premium
7 Indian Institute of 12/18/2012 Management Raipur Penetration 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
8 Karbon, Micromax, Intex, iball etc. are Indian Institute of Management Raipur 12/18/2012 certain examples where companies resort to penetrative pricing
9 Indian Institute of 12/18/2012 Management Raipur Maybelline’s use of Penetrative Pricing
10 Role 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 Raipur Demand Regulator
12 Indian Institute of 12/18/2012 Management Raipur PVR & Cinemax changing prices to control demand
13 Role 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 Raipur Revenue Generator
15 Indian Institute of 12/18/2012 Management Raipur Royal Stag & IKEA’s pricing act as revenue generator
16 Role 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 Raipur Pricing 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 Raipur Positioning of a Product
19 Indian Institute of 12/18/2012 Management Raipur Pricing as low end positioning
20 Indian Institute of 12/18/2012 Management Raipur Competitive Tool Marketing Strategy Competitive Demand Tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
21 Indian Institute of 12/18/2012 Management Raipur
22 Factors that affect Pricing Indian Institute of 12/18/2012 Management Raipur
23 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Common objectives of Objectives the company are Cost Marketing Mix 1. Survival in the Strategy market 2. Profit maximization External Factors 3. Market share The Market leadership Demand 4. Product quality Competition leadership. Other External Factors
24 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Survival in market Objectives Due to intense Cost competition Setting low price Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
25 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Profit maximization Objectives Prefer financial results to Cost long run performance. Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
26 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Market Share Leadership Objectives Cost Conditions are • Highly price sensitive market • Low price affect potential buyers Marketing Mix Strategy • Economics of scale External Factors The Market Demand Competition Market Share 16.9% Market share 17.3% Other External Factors
27 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Product Quality Leadership Objectives Cost The company set high prices and provide high quality products in Marketing Mix the market. Strategy External Factors The Market Demand Competition Other External Factors
28 Indian Institute of 12/18/2012 Internal 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 Competition Other External Factors
29 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Objectives Cost Marketing Mix Rising prices of Strategy petrol due to rising costs of External Factors imports The Market Demand Competition Other External Factors
30 Indian Institute of 12/18/2012 Internal 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 McVeggie Marketing Mix and McChicken burgers that Strategy cost Rs 50-60 and the BA products include McAloo tikki and Chicken McGrill External Factors burgers which cost Rs20-3 This has been done to satisfy The Market consumers which different price Demand perceptions. Competition Other External Factors
31 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing To set the price the Objectives marketers should take into consideration the market Cost demand Marketing Mix Strategy External Factors The Market Demand Competition Hafte Ka Sabse Sasta Din” Other External Factors
32 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Objectives Cost Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
33 Indian Institute of 12/18/2012 Internal Factors Management Raipur Government policies. Marketing Objectives Inflation/deflation and Cost interest rate affect selling price because they affect cost Marketing Mix of production and consumer Strategy perceptions related product price External Factors The Market Demand Competition Other External Factors
34 Price Sensitivity Indian Institute of 12/18/2012 Management Raipur
35 Indian Institute of 12/18/2012 Management Raipur Price 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Raipur Types 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 Predatory Form 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 Predatory Form 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 Sky TATA Sky (A joint venture of TATA And Sky TV) gained market leadership having the first mover advantage. Soon they had mighty rivals like DISH TV, AIRTEL DIGITAL TV etc. So have an edge, they launched various price cuts giving benefits like: Budget packs Regional packs
51 Indian Institute of 12/18/2012 Management Raipur Add on and A La Carte Packs Twice 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 Raipur Ghadi did extensive soil testing and improved on its ability to work in hard water in UP region. They targeted the mass and soon became famous. In turn Everyone else in the market had to lower down prices to counter attack.
54 Indian Institute of 12/18/2012 Management Raipur Chik Shampoo: Chik Shampoo ( Cavin Kare) used penetration pricing by changing the whole game altogether by launching a completely new SKU ( sachets) into the Indian market.
55 Indian Institute of 12/18/2012 Management Raipur Sachets were present before Chik came to market but they were not present for all FMCG product. With Chik‘s sachets. Cavin Kare group targeted the lower level of the pyramid successfully. In response to the attack, the global giants like Unilever, Garnier, P&G etc. had to come out with sachets which they were used to give 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 Raipur They prices their products competitively and when they faced pressure from their competitors, a new SKU (Parle g in 2 rupees packet) was launched and that prevented Tiger ( glucose biscuit brand from Britannia) from getting hold of the market. Tiger was then gradually rolled back from a major part of the market.
58 Indian Institute of 12/18/2012 Management Raipur LG Television: LG entered the market when the Indian market was dominated by local players like Videocon, Onida and BPL. For multinationals, only SONY had left a mark. LG used the mass production method and thus reduced the price more and more and in turn attracted more and more buyers.
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60 China Mobile Phones in India Indian Institute of 12/18/2012 Management Raipur
61 Indian Institute of 12/18/2012 Management Raipur China 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 Predatory Form 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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
66 Indian Institute of 12/18/2012 Management Raipur Predatory 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
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68 Indian Institute of 12/18/2012 Walmart: The third largest public corporation Management Raipur by revenue, this firm has literally conquered the retail market because of its predatory pricing. They sell in bulk and give huge discounts to customers and thus could capture the market well. They own huge stores and they are well known to take feedback to understand market sentiments from petty truck drivers and other petty staff members.
69 Indian Institute of 12/18/2012 Management Raipur Big Bazar
70 Indian Institute of 12/18/2012 Management Raipur Best Price: Best Price is a Bharti & Walmart joint venture in India. They have opened a chain of stores on the lines of the large Walmart stores across the globe. As FDI in retail had limitations, they opened it for shopkeepers and institutional sales, but the relaxed norms let them reach a wider audience. They have priced everything very low and they are using Wal-Mart's forte here in India as well.
71 Indian Institute of 12/18/2012 Management Raipur Reliance’s Rs. 500/- Mobile
72 Indian Institute of 12/18/2012 Management Raipur Predatory 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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
74 Indian Institute of 12/18/2012 Management Raipur Psychological Pricing
75 Indian Institute of 12/18/2012 Management Raipur Psychological 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 Raipur Psychological Pricing MOTOYUVA - W156
77 Indian Institute of 12/18/2012 Management Raipur Psychological 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 12/18/2012 Psychological Pricing - Playstation Management Raipur
79 Indian Institute of 12/18/2012 Management Raipur Psychological 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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
81 Indian Institute of 12/18/2012 Management Raipur Perceived 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.
82 It 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 Raipur Vertu: Vertu is an expensive mobile phone brand owned by Nokia. The phones in the Vertu series are not very high tech but still they come at a huge price. The Vertu with very basic features comes with precious stones and metals and comes a t a starting price of approx Rs. 200000/-. This product works solely on customer perception as this brand commands commendable premium as far as brand value is concerned.
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85 Indian Institute of 12/18/2012 Sony LCD & LED TV’s: Sony earned huge Management Raipur revenues by using skimming pricing technique for their LCD and LED display panels. They were prices at INR 21 Lakhs almost a decade ago and now they are priced at 43 Lakhs for a similarly sized better featured model. Sony has a premium brand reputation in consumer electronics model and they encashed on it. When they started facing the heat of the competition, they came up with ‗Monolithic Design Bravia‘ and tried to retain their market share.
86 Indian Institute of 12/18/2012 Designer Branded Clothes : The price of designer Management Raipur clothes runs into thousands on Euros and the brands like D&G , Versace, Armani etc. are able to sell clothes at such high prices because these clothes are perceived as fashion accessories rather than basic clothes. As the are held very high in public perception so they come at a premium pricing. The denims for Armani, for example start at whooping 15000 INR.
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88 Indian Institute of 12/18/2012 Management Raipur Omega: Premium Swiss watches sell at a huge price premium. Omega is one amongst them. It‘s a brand of the swatch group company. These watches are often made up of precious metals and stones. Also, Swatch has the credit of having the thinnest chrono to its name. But the biggest factor for the huge price tags that these watches carry is the positive mass appeal and perception.
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90 Indian Institute of 12/18/2012 Management Raipur Rolls Royce: This is another Example of a brand that works on perceived value pricing. Rolls Rocye sells its cars only to the elitist class and is available for sale on the sole discretion of the company. As this is found only with the elites, this brand comes at a huge price. The prices of Rolls Royce Phantom and Ghost run into crores of INR and they do not have any real competitor due to the perceived brand image which is enjoyed by just them.
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92 Indian Institute of 12/18/2012 Apple Products: The ―i‖ products also rank very Management Raipur high on perceived pricing strategy. This is evident from the fact that Apple makes all the launches a huge event and public flock in in large numbers to get the products on priority basis. No doubt, that the products are very sophisticated and technically sound, but Apple has still carved out a market for itself which is happy paying a huge price premium for their products.
93 Indian Institute of 12/18/2012 Management Raipur The perceived pricing strategy works here because Apple priced its latest iphone at a 25% price premium than the nearest competitor from Samsung (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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
96 Indian Institute of 12/18/2012 Management Raipur Value Pricing • The setting of a product or service's 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.
97 Nike Studio Wrap – Premium Pricing Indian Institute of 12/18/2012 Management Raipur
98 Indian Institute of 12/18/2012 Management Raipur Nike 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 Raipur Dove – High price to indicate premium quality
100 Indian Institute of 12/18/2012 Management Raipur Dove – High price to indicate premium quality • Company aims to be product quality leader in the market. • Priced higher than its competitors.
101 Indian Institute of 12/18/2012 Management Raipur Tata Aria – Premium pricing(failure )
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103 Indian Institute of 12/18/2012 Management Raipur Tata 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 Raipur TAG Heuer
105 Indian Institute of 12/18/2012 Management Raipur TAG Heur – Premium pricing Swiss watchmaker TAG Heuer raised average price of its watches 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 Raipur Premium Pricing – Chevy Cruze
107 Indian Institute of 12/18/2012 Management Raipur Premium 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 GM's 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 Predatory Form 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 Raipur Competitive Pricing Surf Excel
112 Indian Institute of 12/18/2012 Management Raipur The price strategy of Surf Excel has always been in accordance with it competitors
113 Indian Institute of 12/18/2012 Management Raipur Honda 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 Raipur Kodak - 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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
118 Indian Institute of 12/18/2012 Management Raipur Product 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 Raipur Maruti WagonR and Maruti Zen Estillo: Both these vehicles are powered by the same K10 engine from Suzuki and are basically of the same form factor (hatchbacks). Also the model to model specification is the same (LX,Lxi,Vxi). Only the external shape is different and so the price is different. The model to model variation in features is also the same. Even the gear shift mechanism and other mechanical and electrical equipments are the same.
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121 Indian Institute of 12/18/2012 Management Raipur Nokia Cell phones
122 Indian Institute of 12/18/2012 Management Raipur Nokia 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 Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
124 Promotional 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 Raipur Types of Promotional Pricing 1. 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.
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127 Indian Institute of 12/18/2012 Management Raipur SAMSUNG 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 Raipur 2. 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.
131 Food Industry Pricing – Multi Price Point Game Indian Institute of 12/18/2012 Management Raipur
132 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Mass Consumption 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 Raipur Food Industry Pricing – Mass Consumption 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 Raipur Food 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 Raipur Food Industry Pricing – Refined Products • 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 Raipur Food Industry Pricing – Refined Products • 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 Raipur Food 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 Raipur Food 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 Raipur Food 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 Raipur Food 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 Raipur Food Industry Pricing – Penetration Pricing • ITC Glucose biscuit • Priced competitively at Rs.2 and Rs.4 packs
142 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Penetration Pricing • 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 Raipur Thank You !!!

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Pricing Siddhant Gupta

  • 1.
    1 Pricing Indian Institute of 12/18/2012 Management Raipur Adarsh Chowdhury (12PGP058) Anurag Rai (12PGP064) Nikhil Garge (12PGP070) Siddhant Gupta (12PGP096) Shubham Singh (12FPM004)
  • 2.
    2 Indian Institute of 12/18/2012 Management Raipur What is a PRICE ? Price is defined as the monetary value of a product. It can also be defined as everything that a customer has to give up in order to acquire a product or service.
  • 3.
    3 Role 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.
    4 Indian Institute of 12/18/2012 Management Raipur Marketing 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
  • 5.
    5 Apple has pricedMac Laptops, iPhone Indian Institute of Management Raipur 12/18/2012 iPod all at a high premium
  • 6.
    6 Indian Institute of 12/18/2012 Management Raipur Sony launched HDTV Bravia at a high premium
  • 7.
    7 Indian Institute of 12/18/2012 Management Raipur Penetration 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
  • 8.
    8 Karbon, Micromax, Intex,iball etc. are Indian Institute of Management Raipur 12/18/2012 certain examples where companies resort to penetrative pricing
  • 9.
    9 Indian Institute of 12/18/2012 Management Raipur Maybelline’s use of Penetrative Pricing
  • 10.
    10 Role 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.
    11 Indian Institute of 12/18/2012 Management Raipur Demand Regulator
  • 12.
    12 Indian Institute of 12/18/2012 Management Raipur PVR & Cinemax changing prices to control demand
  • 13.
    13 Role 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.
    14 Indian Institute of 12/18/2012 Management Raipur Revenue Generator
  • 15.
    15 Indian Institute of 12/18/2012 Management Raipur Royal Stag & IKEA’s pricing act as revenue generator
  • 16.
    16 Role 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.
    17 Indian Institute of 12/18/2012 Management Raipur Pricing as a Positioning tool • Firms use pricing as a tool to position their products & services in the different market segments.
  • 18.
    18 Indian Institute of 12/18/2012 Management Raipur Positioning of a Product
  • 19.
    19 Indian Institute of 12/18/2012 Management Raipur Pricing as low end positioning
  • 20.
    20 Indian Institute of 12/18/2012 Management Raipur Competitive Tool Marketing Strategy Competitive Demand Tool Regulator Role of Pricing Input to Revenue Decision Generator Making Positioning of Product
  • 21.
    21 Indian Instituteof 12/18/2012 Management Raipur
  • 22.
    22 Factors that affect Pricing Indian Institute of 12/18/2012 Management Raipur
  • 23.
    23 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Common objectives of Objectives the company are Cost Marketing Mix 1. Survival in the Strategy market 2. Profit maximization External Factors 3. Market share The Market leadership Demand 4. Product quality Competition leadership. Other External Factors
  • 24.
    24 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Survival in market Objectives Due to intense Cost competition Setting low price Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
  • 25.
    25 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Profit maximization Objectives Prefer financial results to Cost long run performance. Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
  • 26.
    26 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Market Share Leadership Objectives Cost Conditions are • Highly price sensitive market • Low price affect potential buyers Marketing Mix Strategy • Economics of scale External Factors The Market Demand Competition Market Share 16.9% Market share 17.3% Other External Factors
  • 27.
    27 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Product Quality Leadership Objectives Cost The company set high prices and provide high quality products in Marketing Mix the market. Strategy External Factors The Market Demand Competition Other External Factors
  • 28.
    28 Indian Institute of 12/18/2012 Internal 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 Competition Other External Factors
  • 29.
    29 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Objectives Cost Marketing Mix Rising prices of Strategy petrol due to rising costs of External Factors imports The Market Demand Competition Other External Factors
  • 30.
    30 Indian Institute of 12/18/2012 Internal 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 McVeggie Marketing Mix and McChicken burgers that Strategy cost Rs 50-60 and the BA products include McAloo tikki and Chicken McGrill External Factors burgers which cost Rs20-3 This has been done to satisfy The Market consumers which different price Demand perceptions. Competition Other External Factors
  • 31.
    31 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing To set the price the Objectives marketers should take into consideration the market Cost demand Marketing Mix Strategy External Factors The Market Demand Competition Hafte Ka Sabse Sasta Din” Other External Factors
  • 32.
    32 Indian Institute of 12/18/2012 Internal Factors Management Raipur Marketing Objectives Cost Marketing Mix Strategy External Factors The Market Demand Competition Other External Factors
  • 33.
    33 Indian Institute of 12/18/2012 Internal Factors Management Raipur Government policies. Marketing Objectives Inflation/deflation and Cost interest rate affect selling price because they affect cost Marketing Mix of production and consumer Strategy perceptions related product price External Factors The Market Demand Competition Other External Factors
  • 34.
    34 Price Sensitivity Indian Institute of 12/18/2012 Management Raipur
  • 35.
    35 Indian Institute of 12/18/2012 Management Raipur Price 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.
    36 Indian Institute of 12/18/2012 Management Raipur Types 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.
    37 Indian Institute of 12/18/2012 Management Raipur Types 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.
    38 Indian Institute of 12/18/2012 Management Raipur Types 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.
    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.
    40 Indian Institute of 12/18/2012 Management Raipur Types 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.
    41 Indian Institute of 12/18/2012 Management Raipur Types of Pricing Sensitivity • Expenditure Effect As the ratio of the price of the product to the buyer‘s income increases, price sensitivity increases
  • 42.
    42 Indian Institute of 12/18/2012 Management Raipur Types 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.
    43 Indian Institute of 12/18/2012 Management Raipur Types 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.
    44 Indian Institute of 12/18/2012 Management Raipur Types 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.
    45 Indian Institute of 12/18/2012 Management Raipur Types 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.
    46 Indian Institute of 12/18/2012 Management Raipur Types 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.
    47 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 48.
    48 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 49.
    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.
    50 Indian Institute of 12/18/2012 Management Raipur TATA Sky TATA Sky (A joint venture of TATA And Sky TV) gained market leadership having the first mover advantage. Soon they had mighty rivals like DISH TV, AIRTEL DIGITAL TV etc. So have an edge, they launched various price cuts giving benefits like: Budget packs Regional packs
  • 51.
    51 Indian Institute of 12/18/2012 Management Raipur Add on and A La Carte Packs Twice an year subscription holiday
  • 52.
    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.
    53 Indian Institute of 12/18/2012 Management Raipur Ghadi did extensive soil testing and improved on its ability to work in hard water in UP region. They targeted the mass and soon became famous. In turn Everyone else in the market had to lower down prices to counter attack.
  • 54.
    54 Indian Institute of 12/18/2012 Management Raipur Chik Shampoo: Chik Shampoo ( Cavin Kare) used penetration pricing by changing the whole game altogether by launching a completely new SKU ( sachets) into the Indian market.
  • 55.
    55 Indian Institute of 12/18/2012 Management Raipur Sachets were present before Chik came to market but they were not present for all FMCG product. With Chik‘s sachets. Cavin Kare group targeted the lower level of the pyramid successfully. In response to the attack, the global giants like Unilever, Garnier, P&G etc. had to come out with sachets which they were used to give free of cost as samples in rest of the world.
  • 56.
    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.
    57 Indian Institute of 12/18/2012 Management Raipur They prices their products competitively and when they faced pressure from their competitors, a new SKU (Parle g in 2 rupees packet) was launched and that prevented Tiger ( glucose biscuit brand from Britannia) from getting hold of the market. Tiger was then gradually rolled back from a major part of the market.
  • 58.
    58 Indian Institute of 12/18/2012 Management Raipur LG Television: LG entered the market when the Indian market was dominated by local players like Videocon, Onida and BPL. For multinationals, only SONY had left a mark. LG used the mass production method and thus reduced the price more and more and in turn attracted more and more buyers.
  • 59.
    59 Indian Instituteof 12/18/2012 Management Raipur
  • 60.
    60 China Mobile Phonesin India Indian Institute of 12/18/2012 Management Raipur
  • 61.
    61 Indian Institute of 12/18/2012 Management Raipur China 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.
    62 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 63.
    63 Text Books Indian Institute of 12/18/2012 (Special Indian/ South Asian Edition) Management Raipur Geographical Pricing
  • 64.
    64 Indian Institute of 12/18/2012 Management Raipur • Pricing Strategy to gain market share by volume & not by value.
  • 65.
    65 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 66.
    66 Indian Institute of 12/18/2012 Management Raipur Predatory 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.
    67 Indian Instituteof 12/18/2012 Management Raipur
  • 68.
    68 Indian Institute of 12/18/2012 Walmart: The third largest public corporation Management Raipur by revenue, this firm has literally conquered the retail market because of its predatory pricing. They sell in bulk and give huge discounts to customers and thus could capture the market well. They own huge stores and they are well known to take feedback to understand market sentiments from petty truck drivers and other petty staff members.
  • 69.
    69 Indian Institute of 12/18/2012 Management Raipur Big Bazar
  • 70.
    70 Indian Institute of 12/18/2012 Management Raipur Best Price: Best Price is a Bharti & Walmart joint venture in India. They have opened a chain of stores on the lines of the large Walmart stores across the globe. As FDI in retail had limitations, they opened it for shopkeepers and institutional sales, but the relaxed norms let them reach a wider audience. They have priced everything very low and they are using Wal-Mart's forte here in India as well.
  • 71.
    71 Indian Institute of 12/18/2012 Management Raipur Reliance’s Rs. 500/- Mobile
  • 72.
    72 Indian Institute of 12/18/2012 Management Raipur Predatory Pricing – Reliance Mobile • Both handsets along with connections were available for Rs. 500/-. • Intention to wipe out the competition.
  • 73.
    73 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 74.
    74 Indian Institute of 12/18/2012 Management Raipur Psychological Pricing
  • 75.
    75 Indian Institute of 12/18/2012 Management Raipur Psychological 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.
    76 Indian Institute of 12/18/2012 Management Raipur Psychological Pricing MOTOYUVA - W156
  • 77.
    77 Indian Institute of 12/18/2012 Management Raipur Psychological 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.
    78 Indian Institute of 12/18/2012 Psychological Pricing - Playstation Management Raipur
  • 79.
    79 Indian Institute of 12/18/2012 Management Raipur Psychological 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.
    80 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 81.
    81 Indian Institute of 12/18/2012 Management Raipur Perceived 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.
  • 82.
    82 It can usedin 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.
    83 Indian Institute of 12/18/2012 Management Raipur Vertu: Vertu is an expensive mobile phone brand owned by Nokia. The phones in the Vertu series are not very high tech but still they come at a huge price. The Vertu with very basic features comes with precious stones and metals and comes a t a starting price of approx Rs. 200000/-. This product works solely on customer perception as this brand commands commendable premium as far as brand value is concerned.
  • 84.
    84 Indian Instituteof 12/18/2012 Management Raipur
  • 85.
    85 Indian Institute of 12/18/2012 Sony LCD & LED TV’s: Sony earned huge Management Raipur revenues by using skimming pricing technique for their LCD and LED display panels. They were prices at INR 21 Lakhs almost a decade ago and now they are priced at 43 Lakhs for a similarly sized better featured model. Sony has a premium brand reputation in consumer electronics model and they encashed on it. When they started facing the heat of the competition, they came up with ‗Monolithic Design Bravia‘ and tried to retain their market share.
  • 86.
    86 Indian Institute of 12/18/2012 Designer Branded Clothes : The price of designer Management Raipur clothes runs into thousands on Euros and the brands like D&G , Versace, Armani etc. are able to sell clothes at such high prices because these clothes are perceived as fashion accessories rather than basic clothes. As the are held very high in public perception so they come at a premium pricing. The denims for Armani, for example start at whooping 15000 INR.
  • 87.
    87 Indian Instituteof 12/18/2012 Management Raipur
  • 88.
    88 Indian Institute of 12/18/2012 Management Raipur Omega: Premium Swiss watches sell at a huge price premium. Omega is one amongst them. It‘s a brand of the swatch group company. These watches are often made up of precious metals and stones. Also, Swatch has the credit of having the thinnest chrono to its name. But the biggest factor for the huge price tags that these watches carry is the positive mass appeal and perception.
  • 89.
    89 Indian Instituteof 12/18/2012 Management Raipur
  • 90.
    90 Indian Institute of 12/18/2012 Management Raipur Rolls Royce: This is another Example of a brand that works on perceived value pricing. Rolls Rocye sells its cars only to the elitist class and is available for sale on the sole discretion of the company. As this is found only with the elites, this brand comes at a huge price. The prices of Rolls Royce Phantom and Ghost run into crores of INR and they do not have any real competitor due to the perceived brand image which is enjoyed by just them.
  • 91.
    91 Indian Instituteof 12/18/2012 Management Raipur
  • 92.
    92 Indian Institute of 12/18/2012 Apple Products: The ―i‖ products also rank very Management Raipur high on perceived pricing strategy. This is evident from the fact that Apple makes all the launches a huge event and public flock in in large numbers to get the products on priority basis. No doubt, that the products are very sophisticated and technically sound, but Apple has still carved out a market for itself which is happy paying a huge price premium for their products.
  • 93.
    93 Indian Institute of 12/18/2012 Management Raipur The perceived pricing strategy works here because Apple priced its latest iphone at a 25% price premium than the nearest competitor from Samsung (Galaxy S3)
  • 94.
    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.
    95 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 96.
    96 Indian Institute of 12/18/2012 Management Raipur Value Pricing • The setting of a product or service's 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.
  • 97.
    97 Nike Studio Wrap– Premium Pricing Indian Institute of 12/18/2012 Management Raipur
  • 98.
    98 Indian Institute of 12/18/2012 Management Raipur Nike 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.
    99 Indian Institute of 12/18/2012 Management Raipur Dove – High price to indicate premium quality
  • 100.
    100 Indian Institute of 12/18/2012 Management Raipur Dove – High price to indicate premium quality • Company aims to be product quality leader in the market. • Priced higher than its competitors.
  • 101.
    101 Indian Institute of 12/18/2012 Management Raipur Tata Aria – Premium pricing(failure )
  • 102.
    ‹#› Indian Instituteof 12/18/2012 Management Raipur
  • 103.
    103 Indian Institute of 12/18/2012 Management Raipur Tata 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.
    104 Indian Institute of 12/18/2012 Management Raipur TAG Heuer
  • 105.
    105 Indian Institute of 12/18/2012 Management Raipur TAG Heur – Premium pricing Swiss watchmaker TAG Heuer raised average price of its watches from $250 to $1000 & Sales volume increased sevenfold! Basis of Pricing:- • Price affects perception of quality • Price affects consumer perceptions of prestige
  • 106.
    106 Indian Institute of 12/18/2012 Management Raipur Premium Pricing – Chevy Cruze
  • 107.
    107 Indian Institute of 12/18/2012 Management Raipur Premium 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 GM's 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.
    108 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 109.
    109 Indian Institute of 12/18/2012 Management Raipur Competitive Pricing (An Example of Pricing Failure)
  • 110.
    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.
    111 Indian Institute of 12/18/2012 Management Raipur Competitive Pricing Surf Excel
  • 112.
    112 Indian Institute of 12/18/2012 Management Raipur The price strategy of Surf Excel has always been in accordance with it competitors
  • 113.
    113 Indian Institute of 12/18/2012 Management Raipur Honda City – Competitive Pricing
  • 114.
    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.
    115 Indian Institute of 12/18/2012 Management Raipur Kodak - Competitive Pricing
  • 116.
    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.
    117 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 118.
    118 Indian Institute of 12/18/2012 Management Raipur Product 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.
    119 Indian Institute of 12/18/2012 Management Raipur Maruti WagonR and Maruti Zen Estillo: Both these vehicles are powered by the same K10 engine from Suzuki and are basically of the same form factor (hatchbacks). Also the model to model specification is the same (LX,Lxi,Vxi). Only the external shape is different and so the price is different. The model to model variation in features is also the same. Even the gear shift mechanism and other mechanical and electrical equipments are the same.
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    120 Indian Instituteof 12/18/2012 Management Raipur
  • 121.
    121 Indian Institute of 12/18/2012 Management Raipur Nokia Cell phones
  • 122.
    122 Indian Institute of 12/18/2012 Management Raipur Nokia 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.
    123 Indian Institute of 12/18/2012 Management Raipur Penetration Pricing Promotional Geographical Pricing Pricing Product Predatory Form Pricing Pricing PRICING STRATEGY Competitive Psychological Pricing Pricing Premium Perceived Pricing Value Pricing
  • 124.
    124 Promotional 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.
    125 Indian Institute of 12/18/2012 Management Raipur Types of Promotional Pricing 1. 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.
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    126 Indian Instituteof 12/18/2012 Management Raipur
  • 127.
    127 Indian Institute of 12/18/2012 Management Raipur SAMSUNG Omnia
  • 128.
    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.
    129 Indian Institute of 12/18/2012 Management Raipur 2. 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.
    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.
  • 131.
    131 Food Industry Pricing– Multi Price Point Game Indian Institute of 12/18/2012 Management Raipur
  • 132.
    132 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Mass Consumption 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.
    133 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Mass Consumption 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.
    134 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing • Net weight of package was reduced to account for increase in raw material prices • Parle G Glucose Biscuits
  • 135.
    135 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Refined Products • 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.
    136 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Refined Products • 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.
    137 Indian Institute of 12/18/2012 Management Raipur Food 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.
    138 Indian Institute of 12/18/2012 Management Raipur Food 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
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    139 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Cream Biscuit • Kreams Gold – Image Pricing strategy • Packs priced at Rs 5, Rs 10 and Rs 18
  • 140.
    140 Indian Institute of 12/18/2012 Management Raipur Food 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.
    141 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Penetration Pricing • ITC Glucose biscuit • Priced competitively at Rs.2 and Rs.4 packs
  • 142.
    142 Indian Institute of 12/18/2012 Management Raipur Food Industry Pricing – Penetration Pricing • 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.
    143 Indian Institute of 12/18/2012 Management Raipur Thank You !!!