Pricing & Sales Promotion

Why is Pricing important?

There is only one boss the

customer. And he can fire everybody in the company from the chairman on down,

simply by spending his money somewhere else.

- Sam Walton

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Pricing Strategies

• Wal-Mart’s core pricing philosophy: be the market leader in price.

• Customers are looking for the greatest benefit for their money. • There are four ways to determine the price of an item:

– Costs– Value– Competition– Target return

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Wal-Mart’s Pricing Strategies

• Sam Walton's view: no matter what the cost of the item, always pass a great deal on to the Customer.

• This philosophy has earned the Customers’ trust and loyalty over the years.

• The Customer never has to wait for a sale to get their money’s worth.

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EDLP Formula

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Underlying Pricing Philosophy

– To offer “Every Day Low Prices” (EDLP). This is a long-term, retail pricing commitment to our Customers.

– To engage in fair, honest competition and do it better than anyone else.

– Not to be the largest retailer, instead only be the best. Competition makes us a better

– Deliver Wal-Mart philosophy of delivering “Always Low Prices, Always”.

Responsibility of Pricing Team

• Initial Price Survey and Target Setting to understand basket price position

• Establishing price position goal vs. competition (overall and by category)

• Developing a scalable model for Comp Data Collection

• Managing Ongoing Weekly Price Surveys

• Ensuring that this price gap is maintained and monitored

• Reporting and analyzing survey results on weekly basis

• Facilitating weekly pricing meeting with Merchandising

• Completing comprehensive review of pricing basket on Quarterly basis

• Approval of Pricing Zones/Traits - which stores are to tagged in which zone/traits

• Report and present weekly/monthly pricing index to a leadership

• Interact with internal departments (i.e. Merchandising, Operations, Finance)

• Promote a positive, supportive teamwork environment

Comping Horizon – Coverage & Frequency

Comping Basket No. Of Items Comping Frequency

Daily Basket 24 Daily

Market Basket (MB) 1 119 Weekly

Market Basket (MB) 2 162 Fortnightly

Market Basket (MB) 3 57 Monthly

Fruit & Vegetables 12 Alternate Day (M,W,F)

Total 374 42% (Revenue)

Note – 1. 65 Key Items across various categories, included in above list are comped in Secondary Markets on a

Weekly Basis2. Apart from above 40 Items are also Comped on Weekly Basis with Organized Trade

Data Collection Methodology

• Price Comping Associates to collect market operating prices (MOP) from panel of Wholesalers & Reseller’s only as per planned frequency

– Wholesalers – Their Selling Price– Retailers – Their Purchase Price

• The Source/Panel for Price Comping to be duly signed off validated quarterly by Buyers & BDA Team

• To ensure correct calculation of MOP by Price Comping Associates, Merchants to provide complete Value Chains for their respective categories

• Also Merchants to facilitate procurement of Schemes/Market Promotion being offered by vendors to general trade to help Price Comping team do validation of MOP

• Price Comping Associates to collect copy of retailer invoice only in exceptional cases, wherever there seems to be a major disconnect between MOP and Store Selling Price

• In case of non availability of the Bill, the same to be escalated to BDA Team for appropriate support

• Respective Buyers to ensure joint market Visit with the Price Comping Associates at least once a month

Responsibility of Price Comping Associate

• To Comp Strictly from defined set of Competition Outlets

• Adherence to Comping Roaster defined by Central Pricing Function

• Adherence to Comping Timelines - Diligently Follow up Daily Schedule

• Provide Market Intelligence to Central Pricing Team - Specially of high volatile items

• Collecting appropriate Leaflets/Flyers for the competitors visited

• Using suggested techniques to cross verify data prior to submission

• Maintain up to date records of Comping Data/Flyers/Bills collected from the Market

• Help operations to carry out random checks on in store price sign ages

• Build connect with customers to get indirect feedback on price perceptions

• Work seamlessly with store operations and sales team to support business

Decision Analysis/Reporting

• Central Pricing Team to consolidate the entire MOP Data basis feedback from Price Comp Associates

• Central Pricing To circulate following periodic Reports to Leadership

– Daily Price Index (Everyday Covering Select List of 36 items)

– Weekly Price Index viz Annual Price Target (Every Thursday covering weekly – Food Category)

– Fortnightly Price Index viz Annual Price Target (Every Thursday covering FMCG Category )

– Price Suggestion Report (Every Thursday)

– Secondary Market Index – covering 65 items (Every Tuesday)

– F&V Price Comparison with Organized Retail ( Thrice a Week)

– Common Item Price Comparison with Organized Retail – 33 Items (Once a Week)

– Price Suggestion Adherence Report (Every Friday)

• For new Stores, Central Pricing to conduct at least 2 -3 cycles of Price Benchmarking to reflect the Market reality of new territories/regions.

Daily Price Index Comping – 6th May’10 to 20th May’10

Cat Sub - Cat Amritsar Zirakpur Chandigarh Ambala Panchkula Patiala

43 Ghee 1.00 1.01 1.00 1.01 1.00 1.01

43 Oil 0.99 1.02 1.01 1.02 1.02 1.00

49 Flour 0.98 1.00 1.00 1.02 1.00 1.00

49 Pulses 1.01 1.04 1.00 1.02 1.03 1.06

49 Sugar 1.00 1.06 1.02 1.01 1.01 1.07

52 Soda 1.04 1.03 1.03 1.02 0.99 1.04

Overall 1.00 1.03 1.02 1.02 1.00 1.03

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Common Items Price Comparison

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ITEM DESC SIZE

BEST PRICE MODERN TRADE

AMRITSAR ZIRAKPUR SUPER MARKET

C0MPACT HYPER

MRP SP MRP SP MRP EASY DAY ASR ALPHA-ASR BIG BAZAAR-CHD

AMUL BUTTER 100 GM 25.00 23.90 25.00 23.90 25.00 23.75 25.00 25.00

AMUL LITE 100 GM 20.00 16.90 20.00 17.89 20.00 19.80 20.00 0.00

NUTRALITE BUTTER 100 GM 20.00 18.91 20.00 18.91 20.00 19.80 20.00 0.00

FROZEN PEAS 1 KG 125.00 109.90 145.00 114.90 125.00 123.75 0.00 145.00

MAGGI 2 MIN MASALA 180G 20.00 18.20 20.00 18.20 20.00 19.80 20.00 20.00

MAGGI 2 MIN MASALA 360G 40.00 36.40 40.00 36.40 40.00 39.50 40.00 38.00

RED LABEL LEAF 950G 240.00 215.56 240.00 215.56 240.00 220.00 238.00 0.00

REALBURRST ORANGE 1L 65.00 45.00 65.00 45.00 65.00 51.00 65.00 49.50

TILDA KHUSH LG 5 KG 345.00 209.38 0.00 209.38 345.00 199.00 215.00 215.00

DAWAT ROZANA BM RICE 5 KG 384.00 252.72 384.00 252.72 384.00 257.00 239.00 275.00

SKU roles

Summary• Every SKU in a sub category has a role to perform.• The pricing strategies are defined based on the role. • Strategies are very specific to that particular SKU.• The Role that an SKU performs is based on the sales volume

expected off that SKU.• These roles are decided from the Category role Matrix.

SKU role The classification of sub

categories are:

– Destination

– Routine

– Convenience

– Specialty

– Seasonal

To decide on the pricing

we further subdivide

them as follows:• Destination

-Killers (or KVI’s)

-Priority• Routine

-Priority

-Regular• Convenience • Seasonal• Specialty

SKU Role Understanding/applicabilityDiscount

Destination Killer( DK)

Only FOR KVIs,market leading SKUs by

volume.

Destination priority(DP)

All priority SKUs of Destination Sub cat.

Routine Priority (RP)All priority SKUs of Routine Sub cat

Routine Regular(RR)All regular Skus of Routine Subcat

Convenience As Per Sub cat role.

Sesaonal Sesaonal Sub cat wil perform the role of a

DP.

Speciality As per sub cat role.

Understanding of SKU role and Discounts on PriceCUSTOMER IMPRESSION

BEST deal in city/com of refer

May be Cheapest in City

Pricing same as competition ( Regular

Pricing).

May be Cheapest in City

Pricing same as competition ( Regular

Pricing).Pricing same as

competition ( Regular Pricing).

May be Cheapest in City

If Then

Your KVI lines are overpriced

Customers will think that your store is very expensive. They may decide to shop somewhere else

You are out of stock of KVI lines

Customers will think that you have a bad variety of Products. They may decide to shop else where.

KVI’s are SKU’s that are part of the monthly basket and customers are highly aware of price.

“Known Value Items” (KVI)

Destination Killers

KVI’s & market leaders

National brand leaders

Well promoted advertised

High Volume SKU’s

company’s Pricing-Best in city at all times.

Killer discounts as applicable

HWP/Garments as applicable

Destination priority

• Destination SKU’s non KVI’s.

Destination priority discounts as applicable.

HWP/Garments discounts as applicable.

Routine - Regular Routine purchase SKU’s No real brand loyalty. Need Satisfier Customer will pick up first available brand Discounts as applicable.

Convenience

• Discounts are optional.

• Convenience needs aggressive promotions.

Specialty/ Seasonal

• Discounts are optional.

• Sampling or trials are encouraged.

Sub Cat SKU role

Discounts

Other MRP CSP RSP

Destination Killer (KVI) 4% Promotions

Very high frequency

100 96(100-4)

951%< than

CSP

Priority 3% Promotions

Very high frequency

100 97(100-3)

961%<than

CSP

Routine Priority 3% Promotions

Average 26 weeks

100 97(100-3)

961%<than

CSP

Regular 2% Promotions

Average 26 weeks

100 98(100-2)

971%<than

CSP

Convenience

0% to Optional

Promotions

Low

NA NA NA

Specialty/Seasonal

0% to Optional

Promotions

High Excitemen

t

NA NA NA

SUB CAT / SKU Role/Discounts/Promotions/Price-Food-Example

Types of consumer promotions

Types of consumer promotions

Brand Offer Our Price

Kissan Complete Rs. 7 Off   NA

Coke/Thums Up/Fanta/Sprite

Buy 1 get 1 Bhujia namkeen Rs.10 + Subway disount coupon of Rs.50/-

  NA

SONA MASOORI SUPER PREMIUM RICE 25 KG 625(MRP) 559(CSP)

SONA MASOORI STANDARD 25 KG 500 (MRP) 465(CSP)

BOOST 500G REFILL PACKBUY 1, GET 1 BOOST BITES 75GM WORTH Rs. 15/- FREE!

 SPL SC JAM MIXED FRUIT 200GM BUY 1, GET 1 FREE!  

GOLD DROP SUNFLOWER OIL 1 LIT 99 ( MRP) 88 (CSP)

GOLD DROP SUNFLOWER OIL 15KG (16.48 L) 1500 (MRP)1360 (CSP)

SUGAR ECONOMY 5KG 125 (MRP) 87 (CSP)

RAWA PREM 2KG 48 (MRP) 44.9 (CSP)

RICE FLOUR 1 KG 22.5 (MRP) 17 (CSP)

CHANNA BESAN STANDARD 1 KG 55 (MRP) 42 (CSP)

PRIYA DOUBLE FILTERED GROUNDNUT OIL 1LT 79 (MRP) 77 (CSP)

RAW PEANUTS PREMIUM 1KG 65 (MRP) 55 (CSP)

TOOR DAL STANDARD 5 KGS 260 (MRP) 209 (CSP)

URAD WHOLE PREMIUM 1KG 68 (MRP) 48 (CSP)

BSF CHILLI POWDER 500GMS 76 (MRP) 65 (CSP)

TAMARIND PREMIUM 1 KG 62 (MRP) 44 (CSP)

COMBI PACK 100 GMS EACH (4 skus) 71 (MRP) 55 (CSP)

Chilly, Coriandar, Cumin and Turmeric:100 gms each

Gift Your Employees – Dry Fruits• 5 pack sizes available at 5 aggressive price points• Assorted packs of cashew, raisins, almond, apricot, dates, figs

& pistachio• Bulk discounts available • company’s quality assured• We don’t stop here with our gifts – Every gift pack comes with

a Rs. 99/- gift coupon which can be redeemed in any of the company’s 35 outlets on a minimum purchase of Rs. 999*

* Excluding Electronics

Gift Your Employees – Dry Fruits

• Offer Prices

Dry Fruits Assorted Pack Offer Price GrammagePack Size 1 129 120 gmPack Size 2 179 200 gmPack Size 3 239 240 gmPack Size 4 349 300 gmPack Size 5 389 450 gm

* Samples available on request

DRY FRUITS

Gift Your Employees - Crackers• Diwali is a season of lights and crackers• company’s also gives you an option to gift your employees an

assorted pack of crackers (annexure attached)• 5 pack sizes available at more than 75% off on MRP• Assorted packs available from Rs 125/- onwards.• Needless to say - Every gift pack comes with a Rs. 99/- gift

coupon which can be redeemed in any of the company’s 35 outlets on a minimum purchase of Rs. 999*

* Excluding Electronics

Gift your Employees - Crackers

• Offer Prices

Assorted Cracker Packs MRP Offer Price DiscountWinner 15 I tems - Ayyan's 680 125 82%Great 28 I tems - Standard 1180 275 77%Fantastic 34 I tems - Standard 1760 400 77%Diamond 43 I tems - Standard 2740 650 76%Grande 51 I tems - Ayyan's 7187 1200 83%

CRACKERS