ditch the discount

35
H THE DISCOUNT y Aditya Kumar

Upload: sameer-mathur

Post on 12-Aug-2015

19 views

Category:

Marketing


0 download

TRANSCRIPT

Page 1: Ditch the discount

DITCH THE DISCOUNT

By Aditya Kumar

Page 2: Ditch the discount

What are you talking about ?

Page 3: Ditch the discount

But Discounts bolster sales in timeOf weak demand.It doesn’t make sense.

Page 4: Ditch the discount

After extensive analysis, it has been found that

Page 5: Ditch the discount

1. Across-the-board discounts unnecessarily reduce profits.

Page 6: Ditch the discount

Even if sales decreases by 25%, firm would still be making 75% of it’s usual sales at full price.

Page 7: Ditch the discount

2 . More importantly, deep discounts devalue products, making it difficult to increase the prices when demand picks up.

Page 8: Ditch the discount

Large pizza sold at discounted price of 10$ during weak demand.

Once people get used to discounted price. It becomes difficult to bring the price to original level.

Price restoration becomes difficult.

Page 9: Ditch the discount
Page 10: Ditch the discount

How to avoid discount trap ?

Page 11: Ditch the discount

Adaptive pricing is the new strategy

Page 12: Ditch the discount

Principle : Different customers have different needs, therefore they place different value on different services provided. Frugal customers

want to experience a product & service without paying the

premium.

Free-spending customers are willing to pay

extra to experience the full

service.

Page 13: Ditch the discount

How does it work ?

• Adaptive pricing is based on realization that pricing is just another attribute of product like color or style.

• Companies routinely vary their attributes to cater to different segment of customers.

• Companies sell through various channels( online, brick&mortar ) and charge vastly different prices based on the channel.

Page 14: Ditch the discount

Simplest adaptive pricing : Versioning

Page 15: Ditch the discount

Versioning – Offering “Good”, “Better”, “Best”

Page 16: Ditch the discount

Harley-Davidson offered it’s lower priced “Super Low” model during recession period.

Page 17: Ditch the discount

P & G offered it’s lower priced version of “TIDE” brand.TIDE BASIC was withdrawn after recession effects wore off.

Page 18: Ditch the discount

• Lower priced versions – Fewer features & lower quantity acts as a magnet for price sensitive customers.

• It allows companies to charge fully for it’s signature items at the same time it can attract price sensitive customers through lower versions.

Page 19: Ditch the discount

How to price in recession ?

Page 20: Ditch the discount

Introduce lower priced versions.

Page 21: Ditch the discount

Use promotion instead of price drop.

Page 22: Ditch the discount

Unbundle services & charge for extra services.

Page 23: Ditch the discount

During recovery

Page 24: Ditch the discount

Introduce premium options

Page 25: Ditch the discount

Offer new ways to experience luxury.

Page 26: Ditch the discount

Adaptive-pricing Innovative techniques

Page 27: Ditch the discount

HYUNDAI Assurance Program was introduced during height of recession in Jan 2009, when auto sales were declining even after steep cuts.

Page 28: Ditch the discount

How did it worked ?The Assurance

program let buyers who lost their jobs stop

making payments and return their

vehicles.

By providing this safety net,

Hyundai was able to prosper

without making further price cuts.

While the U.S. market for auto

sales dropped by more than 20% in 2009, Hyundai’s

U.S. sales increased by 8%.

The cost to the company was minimal: During the first nine months of the Assurance program,

fewer than 50 cars were returned.

Page 29: Ditch the discount

Creative financing techniques

Page 30: Ditch the discount

After 9/11

Page 31: Ditch the discount

introduced 0%

financing.

Page 32: Ditch the discount

Adaptive-pricing offers flexibility as

economy rebounds.

Page 33: Ditch the discount

Through proper use of adaptive-pricing, we can reach new customers &

transfer more of their money to our bottom-line.

Page 34: Ditch the discount
Page 35: Ditch the discount

This presentation has been made by ADITYA KUMAR of MNNIT Allahabad during internship under the guidance of DR. SAMEER MATHUR (IIM LUCKNOW).