Description
This presentation is about the pricing strategies and it include the topics like Setting the price, adapting the price, initiating and responding the price changes
Pricing Strategies
Setting the price, adapting the price, initiating and responding the price changes.
Competitor’s are Spark, Indica Estilo, Polo, Fabia, Swift, Punto, Ritz Segment sells 2 mn cars in the country & market share is 65%.
Alto 2,40,000 units sold in 2009.
Price = Rs 2.28 lac – 2.80 lac.
K series = Rs.3.03 lac, 3.16 lac.
Car Market in India is doubled to 2 mn units in last 4 years.
Middle end of A2 Segment (80,000 units)
= Estilo, Indica, Santro, Figo, Beat, Wagon –R, Hyundi i10, Maruti A-Star. = Swift, Ritz, Hyundi-i20, Polo, Fabia, Punto
Higher end of A2 Segment (24,000 units)
Life style, Shopper’s stop, Reliance trends, Future group, Hyper city & Aditya Birla Retail are promoting their products at 13 % lower price to that of national brands. Tgting 40% more sales growth. Pvt labels constitutes 10% of $32 bn organized retail store.
Reliance trends 14 pvt brands 50% of total sales.Performax & Utsav ethnic wear brand Future group Apparel & Homecare sector Pvt labels 25% of total sale, wants to increase to 30%. Spencer’s retail Smart choice & Tasty wonders Hyper city 30 new brands Aditya Birla Retail brands. Dairy products & apparel
Price Competition Emphasizing price and matching or beating competitors’ prices An effective strategy in markets with standardized products. Lowest-cost competitor (seller) will be most profitable. Allows marketers to respond quickly to competitors Price wars can weaken competing organizations. Nonprice Competition Distinctive product features: Service, Product quality Promotion, Packaging. When a product or service’s features are difficult to imitate by competitors and customers perceive their value Builds customer loyalty by focusing on non price features.
Price
The Importance of Price to Marketers – Most readily changeable characteristic of a product. – Depicts revenues and quantities sold. – Firm’s profitability & symbolic value to customers—prestige pricing. Profit Profits = Total Revenues x Quantity - Total Sold) Costs Costs
= (Price
- Total
Importance due to: 1.) Product differentiation getting blunted 2.) Inter-firm rivalry 3.) Mature products and markets 4.) Customers’ value perception 5.) Inflation in the economy
Factors influencing pricing 1. Consumer’s Perception Cost elements includes Monetary price Costs in use Credit costs Depreciation Costs for installation Time & energy taken to make purchase Value elements include: Disposable income Reliability Utility Emotional appeal Attractiveness of alternatives
Panasonic India launches 32 inches LCD TV 32 C22 at 20% lowered price. Competitor’s = Samsung, LG,
Sony
Price range = Rs 29,000-30,000.
2. Product life cycle stages Acceptance, Maintain market share, Profit. Introduction Skimming / Penetration Growth By seeing the trend in market and general level established in markets. Reverse strategy or Mixed pricing Maturity Supply-demand gap widens& organizations are facing problem of over-capacity.
Reducing supply Stimulating demand Reducing Costs Charging for extra Raising prices on other items Arranging cartels
3. Quality
Quality H M L
Super-value (7) High-Value(8) (Aviation, Travel & Tour) Good-value(6) Economy(1) Medium-value(5)
(Value for money)
Premium(9) Over-charging(4) Rip-off(3)
False economy(2)
L Price
M
H
Strategy 1, 5, 9 can coexist in the same market. (Beauty salons, Organized retail stores, Courier services) Strategy 6,7,8 attack the diagonal positions. Strategies 2,3,4 will amount to overpricing .(Mineral water, Educational Institute, Used Products)
4. Branding Branded Unbranded
High Price differentiation Low H
Price level charged
Steel, Paper, Rice
L Product differentiation
Stages for Establishing Prices Setting the pricing objective Determining the demand Estimating cost
Analyzing competitor’s costs, prices and offer
Selecting a pricing method Selecting the final price
Development of Pricing Objectives
Survival
Profit
Product Quality
Pricing Objective s
Return on Investment
Status Quo
Cash Flow
Market Share
FIGURE 20.8
Buyers may respond to price
1. Value consciousness
Concern about price and quality
2. Price consciousness Striving to pay low prices
3. Prestige sensitivity Being drawn to products signify prominence & status
Selection of a Basis for Pricing
Dimensions of Pricing Cost, demand, and competition Bases for Pricing 1. Type of product 2. Market structure of the industry 3. Brand’s market share relative to competing brands 4. Customer characteristics
Selection of a Basis for Pricing 1. Cost-Based Pricing
Adding a rupee amount or percentage to the cost of the product Cost-Plus Pricing : Adding a specified rupee amount or percentage to the seller’s cost Markup Pricing: Adding to the cost of the product a predetermined percentage of that cost
2. Demand-Based Pricing
Customers pay a higher price when demand for a product is strong and a lower price when demand is weak. 3. Competition-Based Pricing Frequent price adjustments competitors’ prices
Tata sold 3,02,000 units collectively
Pricing Strategies
1. Penetration pricing: Where the organization sets a low price to increase sales and market share. Demand is elastic. 2. Skimming pricing: The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Demand is in elastic. 3. Competition pricing: Setting a price in comparison with competitors. 4. Product Line Pricing: Pricing different products within the same product range at different price points. The greater the features and the benefit obtained the greater the consumer will pay. Maximizes turnover and profits.
5. Bundle Pricing: The organization bundles a group of products at a reduced price. 6. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. Example : Rs. 199 instead of Rs.200 7. Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc. 8. Optional pricing: The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry.
Pricing Strategy 1. Differential Pricing – Charging different prices to different buyers for the same quality and quantity of product
Strategy Negotiated pricing Secondary-market pricing Periodic discounting Action Establishing a final price through bargaining Setting one price for the primary market and a different price for another market Temporary reduction of prices on a patterned or systematic basis Temporary reduction of prices on an unsystematic basis
Random discounting
2.New Product Pricing
Price Skimming Penetration Pricing
3. Product Line Pricing
Establishing and adjusting prices of multiple products within a product line.
Strategy Captive pricing Action Special Pricing for loyal customers. Eg: Kodak offering film roll free with purchase of camera. Pricing the highest-quality or most versatile products higher than other models in the product line Pricing an item in the product line low with the intention of selling a higher-priced item in the line Setting a limited number of prices for selected groups or lines of merchandise
Premium pricing
Bait pricing
Price lining
4. Psychological Pricing
Strategy Reference pricing Action Pricing a product at a moderate level and positioning it next to a more expensive model or brand Packaging together two or more complementary products and selling them for a single price Packaging together two or more identical products and selling them for a single price Setting a low price for products on a consistent basis
Action Ending the price with certain numbers to influence buyers’ perceptions of the price or product Pricing on the basis of tradition Setting prices at an artificially high level to convey prestige or a quality image
Bundle pricing
Multiple-unit pricing
Everyday low prices (EDLP)
Strategy Odd-even pricing
Customary pricing Prestige pricing
5. Professional Pricing Fees set by people with great skill or experience in a particular field 6. Promotional Pricing : a) Price leaders Products priced below the usual markup, near cost, or below cost b) Special-event pricing Advertised sales or price cutting linked to a holiday, season, or event c) Comparison discounting Setting a price at a specific level and comparing it with a higher price. d) Cash Rebate e) Low- Interest Financing f) Longer Payment terms g) Warranties & service contracts h) Psychological discounting
Pricing Tactics
Lo
Hi ? Competitive / higher price
if market share and cost high ? Price higher than competition if market share low and cost high ? Match competition if cost low, irrespective of market share ? Opportunity to raise price above competition if market share high ? Reduce price if market share low / high to get higher penetration
Hi
? Reduce price below competition is market share is low and cost high ? Maintain Competitive price level if market share high
Threat from Competition
? Opportunity to raise price ? Maintain competitive level to emerge as brand leader ? Reduce price to achieve supremacy
Lo
Pricing Moves in a Competitive Market
Hi
Challenge competition by either dropping the price or quickly meet
Challenge competition: Lower the price quickly to protect share Follow the competitors
Relative Market Share Follow price changes
Follow price changes
Lo Lo
Relative Cost Structure
Hi
PRICE WAR
Price wars are frequent in industries: A) Intense competitive rivalry . B) Multilateral services of price-reductions. • To dominate market through lower costs. • Exploring more opportunities. • Capital is intensive and products are homogeneous Examples: Airfares, Internet, Petrol, & Loans. • To utilize excess plant capacity. • Bankruptcy & survey. • Response to a competitive attack
CUSTOMER TRAP
Low-Quality Trap Fragile-market Trap Shallow-Pocket Trap
PRICE INCREASE Over demand Cost Inflation 4 Techniques to increase price: a)Delayed quotation pricing
b) Escalator clauses
c) Unbundling d) Reduction of discounts
COMPETITOR’S RESPONSE TO Price Change
1. Maintain price
2. Maintain price & add value 3. Reduce price 4. Increase price & add value 5. Launch a low –price fighter line.
doc_831384692.pptx
This presentation is about the pricing strategies and it include the topics like Setting the price, adapting the price, initiating and responding the price changes
Pricing Strategies
Setting the price, adapting the price, initiating and responding the price changes.
Competitor’s are Spark, Indica Estilo, Polo, Fabia, Swift, Punto, Ritz Segment sells 2 mn cars in the country & market share is 65%.
Alto 2,40,000 units sold in 2009.
Price = Rs 2.28 lac – 2.80 lac.
K series = Rs.3.03 lac, 3.16 lac.
Car Market in India is doubled to 2 mn units in last 4 years.
Middle end of A2 Segment (80,000 units)
= Estilo, Indica, Santro, Figo, Beat, Wagon –R, Hyundi i10, Maruti A-Star. = Swift, Ritz, Hyundi-i20, Polo, Fabia, Punto
Higher end of A2 Segment (24,000 units)
Life style, Shopper’s stop, Reliance trends, Future group, Hyper city & Aditya Birla Retail are promoting their products at 13 % lower price to that of national brands. Tgting 40% more sales growth. Pvt labels constitutes 10% of $32 bn organized retail store.
Reliance trends 14 pvt brands 50% of total sales.Performax & Utsav ethnic wear brand Future group Apparel & Homecare sector Pvt labels 25% of total sale, wants to increase to 30%. Spencer’s retail Smart choice & Tasty wonders Hyper city 30 new brands Aditya Birla Retail brands. Dairy products & apparel
Price Competition Emphasizing price and matching or beating competitors’ prices An effective strategy in markets with standardized products. Lowest-cost competitor (seller) will be most profitable. Allows marketers to respond quickly to competitors Price wars can weaken competing organizations. Nonprice Competition Distinctive product features: Service, Product quality Promotion, Packaging. When a product or service’s features are difficult to imitate by competitors and customers perceive their value Builds customer loyalty by focusing on non price features.
Price
The Importance of Price to Marketers – Most readily changeable characteristic of a product. – Depicts revenues and quantities sold. – Firm’s profitability & symbolic value to customers—prestige pricing. Profit Profits = Total Revenues x Quantity - Total Sold) Costs Costs
= (Price
- Total
Importance due to: 1.) Product differentiation getting blunted 2.) Inter-firm rivalry 3.) Mature products and markets 4.) Customers’ value perception 5.) Inflation in the economy
Factors influencing pricing 1. Consumer’s Perception Cost elements includes Monetary price Costs in use Credit costs Depreciation Costs for installation Time & energy taken to make purchase Value elements include: Disposable income Reliability Utility Emotional appeal Attractiveness of alternatives
Panasonic India launches 32 inches LCD TV 32 C22 at 20% lowered price. Competitor’s = Samsung, LG,
Sony
Price range = Rs 29,000-30,000.
2. Product life cycle stages Acceptance, Maintain market share, Profit. Introduction Skimming / Penetration Growth By seeing the trend in market and general level established in markets. Reverse strategy or Mixed pricing Maturity Supply-demand gap widens& organizations are facing problem of over-capacity.
Reducing supply Stimulating demand Reducing Costs Charging for extra Raising prices on other items Arranging cartels
3. Quality
Quality H M L
Super-value (7) High-Value(8) (Aviation, Travel & Tour) Good-value(6) Economy(1) Medium-value(5)
(Value for money)
Premium(9) Over-charging(4) Rip-off(3)
False economy(2)
L Price
M
H
Strategy 1, 5, 9 can coexist in the same market. (Beauty salons, Organized retail stores, Courier services) Strategy 6,7,8 attack the diagonal positions. Strategies 2,3,4 will amount to overpricing .(Mineral water, Educational Institute, Used Products)
4. Branding Branded Unbranded
High Price differentiation Low H
Price level charged
Steel, Paper, Rice
L Product differentiation
Stages for Establishing Prices Setting the pricing objective Determining the demand Estimating cost
Analyzing competitor’s costs, prices and offer
Selecting a pricing method Selecting the final price
Development of Pricing Objectives
Survival
Profit
Product Quality
Pricing Objective s
Return on Investment
Status Quo
Cash Flow
Market Share
FIGURE 20.8
Buyers may respond to price
1. Value consciousness
Concern about price and quality
2. Price consciousness Striving to pay low prices
3. Prestige sensitivity Being drawn to products signify prominence & status
Selection of a Basis for Pricing
Dimensions of Pricing Cost, demand, and competition Bases for Pricing 1. Type of product 2. Market structure of the industry 3. Brand’s market share relative to competing brands 4. Customer characteristics
Selection of a Basis for Pricing 1. Cost-Based Pricing
Adding a rupee amount or percentage to the cost of the product Cost-Plus Pricing : Adding a specified rupee amount or percentage to the seller’s cost Markup Pricing: Adding to the cost of the product a predetermined percentage of that cost
2. Demand-Based Pricing
Customers pay a higher price when demand for a product is strong and a lower price when demand is weak. 3. Competition-Based Pricing Frequent price adjustments competitors’ prices
Tata sold 3,02,000 units collectively
Pricing Strategies
1. Penetration pricing: Where the organization sets a low price to increase sales and market share. Demand is elastic. 2. Skimming pricing: The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Demand is in elastic. 3. Competition pricing: Setting a price in comparison with competitors. 4. Product Line Pricing: Pricing different products within the same product range at different price points. The greater the features and the benefit obtained the greater the consumer will pay. Maximizes turnover and profits.
5. Bundle Pricing: The organization bundles a group of products at a reduced price. 6. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. Example : Rs. 199 instead of Rs.200 7. Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc. 8. Optional pricing: The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry.
Pricing Strategy 1. Differential Pricing – Charging different prices to different buyers for the same quality and quantity of product
Strategy Negotiated pricing Secondary-market pricing Periodic discounting Action Establishing a final price through bargaining Setting one price for the primary market and a different price for another market Temporary reduction of prices on a patterned or systematic basis Temporary reduction of prices on an unsystematic basis
Random discounting
2.New Product Pricing
Price Skimming Penetration Pricing
3. Product Line Pricing
Establishing and adjusting prices of multiple products within a product line.
Strategy Captive pricing Action Special Pricing for loyal customers. Eg: Kodak offering film roll free with purchase of camera. Pricing the highest-quality or most versatile products higher than other models in the product line Pricing an item in the product line low with the intention of selling a higher-priced item in the line Setting a limited number of prices for selected groups or lines of merchandise
Premium pricing
Bait pricing
Price lining
4. Psychological Pricing
Strategy Reference pricing Action Pricing a product at a moderate level and positioning it next to a more expensive model or brand Packaging together two or more complementary products and selling them for a single price Packaging together two or more identical products and selling them for a single price Setting a low price for products on a consistent basis
Action Ending the price with certain numbers to influence buyers’ perceptions of the price or product Pricing on the basis of tradition Setting prices at an artificially high level to convey prestige or a quality image
Bundle pricing
Multiple-unit pricing
Everyday low prices (EDLP)
Strategy Odd-even pricing
Customary pricing Prestige pricing
5. Professional Pricing Fees set by people with great skill or experience in a particular field 6. Promotional Pricing : a) Price leaders Products priced below the usual markup, near cost, or below cost b) Special-event pricing Advertised sales or price cutting linked to a holiday, season, or event c) Comparison discounting Setting a price at a specific level and comparing it with a higher price. d) Cash Rebate e) Low- Interest Financing f) Longer Payment terms g) Warranties & service contracts h) Psychological discounting
Pricing Tactics
Lo
Hi ? Competitive / higher price
if market share and cost high ? Price higher than competition if market share low and cost high ? Match competition if cost low, irrespective of market share ? Opportunity to raise price above competition if market share high ? Reduce price if market share low / high to get higher penetration
Hi
? Reduce price below competition is market share is low and cost high ? Maintain Competitive price level if market share high
Threat from Competition
? Opportunity to raise price ? Maintain competitive level to emerge as brand leader ? Reduce price to achieve supremacy
Lo
Pricing Moves in a Competitive Market
Hi
Challenge competition by either dropping the price or quickly meet
Challenge competition: Lower the price quickly to protect share Follow the competitors
Relative Market Share Follow price changes
Follow price changes
Lo Lo
Relative Cost Structure
Hi
PRICE WAR
Price wars are frequent in industries: A) Intense competitive rivalry . B) Multilateral services of price-reductions. • To dominate market through lower costs. • Exploring more opportunities. • Capital is intensive and products are homogeneous Examples: Airfares, Internet, Petrol, & Loans. • To utilize excess plant capacity. • Bankruptcy & survey. • Response to a competitive attack
CUSTOMER TRAP
Low-Quality Trap Fragile-market Trap Shallow-Pocket Trap
PRICE INCREASE Over demand Cost Inflation 4 Techniques to increase price: a)Delayed quotation pricing
b) Escalator clauses
c) Unbundling d) Reduction of discounts
COMPETITOR’S RESPONSE TO Price Change
1. Maintain price
2. Maintain price & add value 3. Reduce price 4. Increase price & add value 5. Launch a low –price fighter line.
doc_831384692.pptx