pricing strategies. price price has different meanings in different situations… what is the price...
TRANSCRIPT
PRICING STRATEGIES
Price Price has different meanings in different
situations…
What is the price of your honesty?
What is the price of your soul?
What is the price of education?
What is the price of a car?
So what do we pay price for…? VALUE
Bundle of utilities
Want satisfying ability
Commodities and services
So these commodities and services are Brands … !!!For which the pricing strategies are designed
Pricing Strategy :
It is a strategic tool that organizations use to differentiate their products from competitors and thereby gain the competitive edge to capture the market.
OBJECTIVES
Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.
Make marketing mix decisions - define the product, distribution, and promotional tactics.
Estimate the demand curve - understand how quantity demanded varies with price.
OBJECTIVES (contd.)
Calculate cost - fixed and variable costs associated with the product
Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc
Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization (status quo)
Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts
Pricing Strategies - Exercise
Place pricing strategies onto the correct section of the matrix :
Wall-Mart launch a new range of own-label soups.
A cable TV provider moves into a new area and needs to achieve a market share.
Holiday Inns try to fill hotels during winter weekends.
Nokia launch a new videophone. Cunard launched two new crew
ships/ Burger King introduces new range
of value meals.
Pricing Strategies - Exercise
Pricing Strategies - Exercise
Price-Quality Strategies
Philip Kotler identified 9 price-quality strategies
Premium HighValue
SuperValue
OverCharging
MidValue
GoodValue
Rip-offFalse
EconomyEconomy
High QualityHigh Quality
Low QualityLow Quality
High PriceHigh Price Low PriceLow Price
PremiumHigh Value Super Value
Overcharging Mid-Value Good Value
Rip-off False Economy Economy
High QualityHigh Quality
Low QualityLow Quality
High PriceHigh Price Low PriceLow Price
PRICING APPROACHES
Demand Oriented pricing
Cost – based pricing
Competitor – based pricing
Demand-oriented pricing Skimming pricing –
a new/innovative product is charged a high price. Then prices are lowered to "skim" off the next layer of buyers
SKIMMING…
WHIRLPOOL OBJECTIVEHarness maximum contribution
when the going is smooth
STRATEGYNothing can cool better & faster…
So get it fast
SKIMMING…
APPLE i-Pod OBJECTIVE
New product ,new market… A new way of listening to music
STRATEGYKeep the prices high, aggressive promotion
Penetration pricing
A low initial price in order to penetrate quickly into the mass market
discourages competitors from entering the market, and is the best approach when many segments of the market are price sensitive
PENETRATION…
REJOICE OBJECTIVE:
To effectively combine packaging size and associated price
STRATEGY
Come out with Re1 sachet… use when you please
PENETRATION…
5PAISA.COM OBJECTIVE
To highlight easy and smooth and cheap internet transactions
STRATEGYSet a very low amount for each transaction which seemed miniscule to the Indian consumer
PENETRATION…
Reliance India Mobile OBJECTIVE
A luxury item in reach of a common man’s hand
STRATEGY“kar lo duniya mutthi mein”
PENETRATION…
T-SERIES CASSETTES OBJECTIVE
To open the floodgates of unprecedented competition..
STRATEGY Sabotaged other players in the
music industry… unbeatable pricing
Prestige pricing
A few products are not taken seriously by some buyers unless they are priced at a particular level
Psychological Pricing
Pricing takes advantage of human psychology that feels like $499.95 is less than $500.
PSYCHOLOGICALLY ODD…
TANISHQ OBJECTIVE
To indicate the auspiciousness in prices
STRATEGYAffordable jewelry over a wide range of prices to choose from
Cost-oriented approaches Standard mark-up pricing –
Typically a manufacturer marks his price up 15% over his costs, a wholesaler 20% over his costs, and a retailer 40% over his costs
Cost-plus pricing
Add a small percentage to the retailer's costse.g. cost plus 5%
Experience curve pricing
A company less to produce a product or provide a service over time, since learning will make them more efficient
Competition-oriented approaches Above-, at-, or below-market pricing -
Certain stores advertise "low cost" or "discount" pricing.
Loss-leader pricing
works on the basis of losing money on certain very low priced advertised products to get customers in the door who will buy other products at the same time
Geographical Pricing
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.
Western union money
Value Pricing.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales.
e.g. value meals at McDonalds.
McDonalds
Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock.
BUNDLING…
BUNDLING …
DOMINO’S
OBJECTIVE
To increase the market share by using price as a strategy.
STRATEGY
Factors like delivery time,4 different pizzas in pack.
PROMOTIONAL…
Premium Pricing- Use a high price where there is a uniqueness
about the product or service.
PREMIUM PRICING…
DOVE OBJECTIVE
To position it as a cut above the rest of the soaps.
STRATEGY“Not a Soap, It’s 1/4th moisturizing cream…”
PREMIUM PRICING…
NOKIA N SERIES OBJECTIVE
To create its unique identity in the crowd flooding the market
STRATEGY
To once again create an exclusivity around a product which had been commoditized
Economy Pricing
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
ECONOMY… AIR DECCAN OBJECTIVE
To expand the pie… to fly the middle class AC three or two traveler
STRATEGYCater to the “Great Indian Dream”
PRICES CRASHING DOWN!!!
ECONOMY…
BIG BAZAAR OBJECTIVE
Simple! Thrash the competition!
STRATEGYA series of well planned advertisements across all media to emphasize low prices
Innovative Packaging Pricing…
REVLON
OBJECTIVETo give an international exposure to the growingly beauty conscious woman
STRATEGYIntroduce low priced small trial bottles of nail enamel to entice the already captive Indian audience
Price War
Price wars are frequent in industries where…
Cost differentiation opportunities exists Capital is intensive and products are
homogeneous
Examples: Telecommunication, Airfares, Cola
Is this the ‘COLA’ War ?!
Discussion: Impact of Ethics on Pricing How should you price if your product is a life-
saving drug?
What are the ethical considerations? Customers have no choice Need to pay for the research When cheaper options doesn’t work Competition decides
The Take-Away Lesson: Adopt a very deliberate price strategy
Will you be the low price leader? Or the service leader?
Will you deliberately price low in order to penetrate the market quickly (first-mover advantage)? Or will you price high to skim off the early adopters at a premium profit?
Will you bundle several products in order to make a greater profit?
Will you round off to the nearest dollar or use an odd price approach?
THE INDIAN FONDNESS OF ENDING WITH A SWEET!!
Cadbury’s
OBJECTIVE
To make your mouth water for more!!!
STRATEGY
Kuch meetha ho jaye!!!
EVERY MARKETER’S DREAM…
NIHIL ULTRA… NOTHING BEYOND… (the pie!)