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 Price
Pricing 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 Products
The 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 Packaging
By 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 Engineering
This 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 Product Price Promotion Place
Consumers

Quality conscious Premium Product High High Show rooms,

concerned with Maals,
functional benefits
value for money

Value conscious Mass Products Medium High General and fancy

Price sensitive stores paan shops
concern with and haats
functional benefits

Price Spurious Low No Kirana, paan

conscious products shops and
haats
 Pricing for Quality Conscious
• Pricing Methods
When 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.