1. PRICING STRATEGIES

2. 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?

3. So what do we pay price for…? VALUE Bundle of utilities Want satisfying ability Commodities and services

4. So these commodities and services are Brands … !!! For which the pricing strategies are designed

5. 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.

6. 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.

7. 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

8. 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.

9. Pricing Strategies - Exercise

11. Price-Quality Strategies Philip Kotler identified 9 price-quality strategies Premium High Value Super Value Over Charging Mid Value Good Value Rip-off False Economy High Quality Low Quality High Price Low Price

12. Premium High ValueSuper Value OverchargingMid-ValueGood Value Rip-offFalse EconomyEconomy High Quality Low Quality High Price Low Price

13. PRICING APPROACHES Demand Oriented pricing Cost – based pricing Competitor – based pricing

14. 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

15. SKIMMING… WHIRLPOOL OBJECTIVE Harness maximum contribution when the going is smooth STRATEGY Nothing can cool better & faster… So get it fast

16. SKIMMING… APPLE i-Pod OBJECTIVE New product,new market… A new way of listening to music STRATEGY Keep the prices high, aggressive promotion

17. 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

18. PENETRATION… REJOICE OBJECTIVE: To effectively combine packaging size and associated price STRATEGY Come out with Re1 sachet… use when you please

19. PENETRATION… 5PAISA.COM OBJECTIVE To highlight easy and smooth and cheap internet transactions STRATEGY Set a very low amount for each transaction which seemed miniscule to the Indian consumer

20. PENETRATION… Reliance India Mobile OBJECTIVE A luxury item in reach of a common man’s hand STRATEGY “kar lo duniya mutthi mein”

21. PENETRATION… T-SERIES CASSETTES OBJECTIVE To open the floodgates of unprecedented competition.. STRATEGY Sabotaged other players in the music industry… unbeatable pricing

22. Prestige pricing A few products are not taken seriously by some buyers unless they are priced at a particular level

23. Psychological Pricing Pricing takes advantage of human psychology that feels like $499.95 is less than $500.

24. PSYCHOLOGICALLY ODD… TANISHQ OBJECTIVE To indicate the auspiciousness in prices STRATEGY Affordable jewelry over a wide range of prices to choose from

25. 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

26. Cost-plus pricing Add a small percentage to the retailer's costs e.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

27. 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

28. 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.

29. Western union money

30. 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.

31. McDonalds

32. Product Bundle Pricing. Here sellers combine several products in the same package. This also serves to move old stock.

33. BUNDLING…

34. DOMINO’S OBJECTIVE To increase the market share by using price as a strategy. STRATEGY Factors like delivery time,4 different pizzas in pack.

35. PROMOTIONAL…

36. Premium Pricing- Use a high price where there is a uniqueness about the product or service.

37. 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…”

38. 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

39. 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.

40. ECONOMY… AIR DECCAN OBJECTIVE To expand the pie… to fly the middle class AC three or two traveler STRATEGY Cater to the “Great Indian Dream” PRICES CRASHING DOWN!!!

41. ECONOMY… BIG BAZAAR OBJECTIVE Simple! Thrash the competition! STRATEGY A series of well planned advertisements across all media to emphasize low prices

42. Innovative Packaging Pricing… REVLON OBJECTIVE To give an international exposure to the growingly beauty conscious woman STRATEGY Introduce low priced small trial bottles of nail enamel to entice the already captive Indian audience

46. Price War Price wars are frequent in industries where… Cost differentiation opportunities exists Capital is intensive and products are homogeneous Examples: Telecommunication, Airfares, Cola

47. Is this the ‘COLA’ War ?!

48. 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

49. 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?

50. THE INDIAN FONDNESS OF ENDING WITH A SWEET!! Cadbury’s OBJECTIVE To make your mouth water for more!!! STRATEGY Kuch meetha ho jaye!!!

51. EVERY MARKETER’S DREAM…

52. NIHIL ULTRA… NOTHING BEYOND… (the pie!)