Pricing Strategy

Affordability is, in determined by two factors-

1.Income of consumer

2.Price of the Product & Services

Factors influencing the price

• Internal Factors

• Cost

• Pricing Objective

• External Factors

• Customers

• Suppliers

• Competitors

Cost Factor (Contd.)

• Promotion as a cost factor

• Credit-based transactions increase cost

HLL has made sustained efforts to tap rural market by investing in an innovative distribution channel (Shakti), customized promotion (operation bharat) communication strategy.

Pricing Objective (Contd..)

• Profit maximization in the long run

• Minimum returns on sales turnover

• Deeper penetration of the market

Here objective is market expansion so the company launches its product at a lower price

• Keeping with competition

Pricing Strategies

• Low Price Points:HLL sells the maximum number of its products in sachet packs in rural areas.Peopsodent toothpaste is available for Rs.4

• Avoid sophisticated packaging;

• Highlight Value , not price

• Product Sharing price

Pricing Strategy

Low PricePricing the product at a lower price really attracts rural population for trying the products.

• For many FMCG companies , Rs.5 is an appropriate price point to draw new customers and increase consumption.

• Tata tea introduced Samunder salt in the economy category.

• Bharat Petroleum has introduced five kg gas cylinders to reduce initial deposits and refill cost for rural consumers. The deposits for 5 kg cylinder is Rs. 350.

Pricing Strategy (Contd..)

No frills ProductsThe production cost can be lowered by using less sophistications and rather concentrating on sturdiness and utility of the product.

• Maharaja Appliances Ltd.. Sells a sturdy Bonus washing machine without a drier for rural market at Rs. 2990/-

• The rural markets operate on a price value proposition LG electronics has knocked off some of the frills in the products. The rural consumer does not require Golden Eye Feature and therefore base models do not have this feature. Again not all consumer need 200 channels and therefore they have provided 100 channels in the base model.

Pricing Strategy (Contd..)

Refill/Reusable PackagingBy giving refill packaging marketers can add value pricing of the product.

• Bournivita available in refill pack• Detergent made available in reusable packaging.

Pricing Strategy

Credit Facilities

• The credit period varies between 7-30 days in the case of fast moving consumer goods,

• 60-90 days credit for fertilizers , seeds , etc.

Pricing Strategy

• Discounts

• Cash discount

• Quantity Discount

• Off season discount

• Promotional Schemes.

Pricing Strategy

Value EngineeringThis technique helps the organization not only lower cost but enhance the value

Nirma detergent powder over a period of ten years has become the largest selling brand in rural India. The success of Nirma is due to affordable price, medium quality, availability at village shops and use of rural specific mass media.

Consumer Categories

Category Annual Income Life style

Quality conscious Over Rs. 1,50,001 Very Rich

Value Conscious Rs.45,001-1,50,000 Consuming class

Price Conscious Rs.22,001- Rs.45000 Climbers

Price in Marketing Mix

Rural Consumers

Product Price Promotion Place

Quality conscious concerned with functional benefits value for money

Premium Product High High Show rooms, Maals,

Value conscious Price sensitive concern with functional benefits

Mass Products Medium High General and fancy stores paan shops and haats

Price conscious

Spurious products

Low No Kirana, paan shops and haats

Pricing for Quality Conscious

• Pricing MethodsWhen price quality relationship are easy to associate marketer can employ the following methods of pricing

• Discriminatory pricing

• Perceived value pricing

• Discriminatory pricing is employed to charge different customers grouped differently projecting in quality offer.

• Companies add features to their products with a view to enhancing their customers perceived value. For each factures which enhance convince durability reliability attractiveness.

Pricing for value customers

These customers are willing to pay for the product of their choice as long they get ‘value for the money’.

• Psychological

• Value Pricing

• Penetration Pricing

• Pricing for Price –Conscious

• Small unit low pricing

• Promotional pricing.

Videcon :Pricing Strategy

Videcon was one of the first companies to enter the rural market with a plethora of products in the home appliances. It attacks market leader Phillips by launching a radio set for Rs.180(the Phillips radio set cost Rs.250) and grabbed a major chunk of the market.

Low Priced shampoo

Cavinkare realized that for a family of five members at rs.2 per sachet and minimum of four hair washes per person per month would mean a Rs. 40 spend fro a shampoo . Many rural families cannot be afford expense.

Operation Bharat: Bundle-Price Strategy

HLL launched a combo pack comprising a Clinic shampoo bottle, a tube each of pepsodent and Fair & Lovely ad Pond;s Dream Flower Talc fro rural areas. HLL provided hampers at discounted prices of Rs. 5 Rs.10 and Rs.20 each in different sizes and combinations. The project was aimed at addressing issues of consumers awareness, attitudes and habits As consumers in rural areas were exposed to and became familiar with such value added value for money alternatives.