DEVELOPING PRICING STRATEGIES AND PROGRAMS

HOW DO CONSUMERS PROCESS AND EVALUATE PRICES?

Tata DoCoMo was one of the first companies to use market

penetration pricing

price isNOT JUST A TAG !

Price has many components for example,

Customers pay through multiple forms

Jet airways uses Combination of cash and

frequent flier miles

WHYis pricing environment changing?

Access to creditUnique product formulationsEnticing marketing campaigns

SOUTH ASIAN – PRICING DILEMMA

Smaller segment of affluent customersLarger segment of aspiring customers

and strugglers

So we need…

Different pricing for different customer groups with

different value propositions

Focus on image and upper end of the market

How buyers discriminate against sellers ?

Get instant price comparisons from thousands of vendors

Name their price and have it met

Priceline.comCustomer states the price he/she wants to

pay and it looks for any seller willing to meet that price

Get products freeFree software movement started by Linux

Even Microsoft, IBM, oracle and other major software producer are wondering : how do you compete with programs that

can had for free ?

How sellers discriminate against buyers ?

Monitor customer behavior and tailor offers

to individuals

Give certain customers access to special prices

FashionandYou.comLuxury shopping club for registered

members

Negotiate prices in online auctions and exchanges

Want to sell your old cellphone Post a sale on EBay.

Pricing and

Traditional

Price takers & accepted prices at

face value

Modern

Actually process price information

Reference pricing

Comparing and observed price to a internal reference price they remember

or an external frame of reference.

Many consumers

use price as an indicator of quality

Price quality inferences

A Rs.4000 bottle of perfume might contain Rs.400 worth of scent, but gift givers pay Rs. 4000 to communicate their high regard for the receiver

Price endings

Many sellers believe prices should end in an odd number

A study showed that demand increased by 1/3rd when the price of a dress rose from Rs.34

to Rs.39

LET’S RECAP

What is priceWays by which buyers and sellers discriminate against each other.Consumer psychology

Created by :Tanvi Maheshwari

Lady Shri Ram College for Women,

during an internship by Prof. Sameer Mathur,

IIM Lucknow