slm-unit-10-mb0046

Marketing Management Unit 10

Sikkim Manipal University Page No. 189

Unit 10 Pricing

Structure:

10.1 Introduction

Learning Objectives

10.2 Factors affecting Price Determination

10.3 Cost based pricing

10.4 Value based and competition based pricing

10.5 Product mix pricing strategies

10.6 Adjusting the price of the product

10.7 Initiating and responding to the price change

10.8 Summary

10.9 Terminal Questions

10.10 Answers

10.11 Mini-case

10.1 Introduction

Price determination is very important aspect of strategic planning. Marketers

fix the price of the product on the basis of cost, demand or competition. Dell,

which allows customers to customize the product adopted flexible pricing

methods. In contrast, Indian Oil companies‟ product prices are fixed by the

Government where company does not have any control. Retailers like Big

Bazaar, Fair Price and Subhiksha target price conscious consumers.

Manufacturers and service providers all over the world outsourced some of

their functions to the developing countries to get cost advantage which help

them in reducing their final price. Internet has become an alternative tool for

shopping to the consumers. It offers a wide range of products at lesser

price.

Learning Objectives

After studying this unit, you will be able to

Find out the factors that influence the pricing strategies.

Understand various approaches to pricing

Analyze the pricing strategies adopted by marketers

Know the situations when marketer should initiate the price cuts.



10.2 Factors affecting Price Decisions:

1. Marketing objectives: There are four major objectives on which prices

are determined. They are survival, current profit maximization, market share

leadership and product quality leadership. Survival strategy is adopted when

company is facing stiff competition from the competitors and it wants quick

reaction and recovery. Current profit maximization strategy is used to

defend the market position. For example, assume a company is operating in

the lubricants business. Its sales and market share are very high. It always

tries to hold their current position. To do this, it increases the price of the

product. The next objective is market share leadership. Here, company

strives to achieve the leadership position in the market. It reduces the price

of the product so that more number of customers buy the product. Through

volume generation, company gets the market leadership position. Product

quality leadership objective is used when company decides to come with

high quality product and premium price. The intention of the company is to

cater to the needs of the niche segment.

2. Costs: The cost of marketing and promoting the product will have direct

impact on the price. For example, When airline fuel cost went up all airline

companies increased the ticket prices Company will be incurring fixed cost

(plant, machinery etc...) as well as variable cost (raw material, labor etc…)

The fixed cost will go down if the number of products produced increases.

The variable cost of the product decreases if the product is produced up to

an optimal level and then once again it goes up. Hence the total cost (fixed

cost plus variable cost) varies according to both costs. Marketer is

interested in knowing the break even analysis when he introduces the

product in the market. The break even point for a product is the point where

total revenue (TR) received equals the total costs (TC) associated with the

sale of the product (TR=TC). A break even point is typically calculated for

businesses to determine whether it would be profitable to sell a proposed

product, as opposed to attempting to modify an existing product instead, so

it can be made lucrative. Break-even Analysis can also be used to analyze

the potential profitability of an expenditure in a sales-based business.

3. 4Ps of marketing: The price of the product is determined by the other

marketing mix elements also. Product influences the price level, i.e. if the

product quality is very high company would like to price it high and vice

Field Code Changed

Field Code Changed

Field Code Changed

/wiki/Breakeven

/wiki/Product_%28business%29

/wiki/Business



versa. The new product requires aggressive promotion and results in higher

promotion cost and higher price. Supply chain management also plays an

important role in the price determination. If the organization is able to

integrate their supply chain well, then it will be having a distribution

advantage over others. For example, Nokia when it introduced 1100

handset in Indian market priced it at Rs. 5200. It did so to get back its R&D

and promotion cost. When the sales picked up, the price of the product has

come down to Rs 3800. Cavin Care introduced sachets and priced at 50

paisa. HUL was forced to come out with sachets at the same price.

4. Nature of the market and demand: The price determination depends on

the nature of the market also. The nature of the market is classified into

following categories.

a. Perfect competition

b. Monopolistic competition

c. Oligopolistic competition

d. Monopoly

a. Perfect competition: The nature of the market where many buyers and

sellers exist. Both the buyers and sellers exhibit the switching habit. If the

seller charges more for the product, then buyer will shift to another seller.

Usually in these types of markets, companies set their prices according to

the competition. For example, in a stock market, prices of shares are

frequently affected due to the large number of buyers and sellers.

b. Monopolistic competition: The nature of the market where many

buyers and sellers exist but no particular buyer or seller has total control

over the market. The difference between perfect competition and

monopolistic competition is that in case of the latter, prices for the products

vary according to product differentiation, whereas in case of the former,

there is a single price. In case of monopolistic competition, prices are fixed

by the gap in the product line of all competitors and on the level of

differentiation. For example, food suppliers, footwear manufacturers and

various service providers exist in monopolistic competitive market.

c. Oligopolistic competition: The market consists of few suppliers who

dominate a large portion of the market. They do not allow new players to

enter the market. They are price sensitive to each other and so are

Formatted: Not Expanded by / Condensed by



dependent on each other For example, automobile manufacturers,

pharmaceutical companies do business in oligopolistic market.

d. Monopoly: In a monopolistic market there is only one seller due to

regulatory, technical or economic entry barriers. Indian Railways has

monopoly over the railway industry in India. It is able to sell its products and

services at the determined rates. Prices are economical in the monopoly

markets that are usually controlled by the government.

Demands for the product vary according to the price set. The general

customer belief is that higher the prices better the quality of the product and

lower the price, lower the quality. Marketer should understand this

perception because this perception will determine the demand for the

product. For example, a customer thinks of Mercedes as a high quality

product and Chik shampoo which costs less than other shampoos as low

quality. After analyzing the perception about the price, marketer has to find

out the price elasticity of demand.

The price elasticity of demand is defined as a percentage change in the

quantity demanded to a percentage change in the price. Assuming that the

price of a product is Rs 12 and market is perfect, Company is able to sell

1000 units per month. If the price is revised to Rs 13 then company expects

900 units to be sold in the particular month. Then the price elasticity of

demand for the product is

Price elasticity of demand= % change in quantity demanded/ % change in

price.

= -10%/ 8.33%

=-1.2%

This means company is having negative price elasticity of demand.

The marketing implication is lower the price elasticity of demand, easier it is

for the marketer to change the price. Marketers who are interested in sales

and when products have inelasticity of demand, then they will go for

lowering the prices of the products.

5. Competition: Price is also determined by how intense the competition is

in the particular industry. Cellular industry and airline industry in India are

involved in such type of price wars. The price war between Hutch (Now

Vodafone) and Airtel is exemplary. Air Deccan which started a no frill airline



made other airliners like Go Air, Spice Jet and Paramount to reduce their

prices.

6. Environmental factors. These external factors are very crucial for the

company‟s price decisions. We discussed the impact of macro and micro

environment on the company‟s strategies. For example, in the union budget,

tax on cigarette is increased. Hence company that manufactures cigarette

should increase the price. The increase in the price is determined by the

government environment which the company cannot control.

Activity 1:

Highlight the factors that affect the prices of the local shoe shop that you

go to. Find out, how often discounts are offered and when they offer? Are

there any competitors to this shoe shop?

10.3 Cost based pricing

I. Cost plus pricing: The method of adding markup to the total cost of the

product.

Procedure for calculating cost plus pricing:

a. Find out the variable cost per unit and fixed cost.

b. Estimate the number of units the company is intending to sell.

c. Calculate the unit cost by the following formula

Fixed costs Unit cost = Variable cost + -------------------------------- Unit sales

d. Find out the required mark up( desired return on sales)

e. Calculate the price by the following formula.

Unit cost Price = -----------------------------------------------

(1- Desired return on sales)

Problem: Company X would like to sell 75,000 units in the year 2008. The

fixed cost of the company is Rs 2 lakhs and variable cost is Rs 5 per unit.

Company wants 30 % profit after sales. Calculate the price of the product to

achieve desired sales and profit.



Solution:

Unit cost = VC+ (FC/ unit sales)

= 5+ (200,000/75000)

= 7.67

Price = Unit cost/ (1- desired return on sale)

= 7.67/ (1-0.3)

= 10.85

Approx Rs 11/unit.

Advantages of cost plus pricing:

1. Sellers are more certain about the cost than the demand.

2. If all the companies in the industry use this method, price becomes

standard.

3. It is fair to both buyers and sellers.

Disadvantages of cost plus pricing:

1. It ignores the demand and competition

2. If fewer units are sold, then fixed cost will be spread to less number of

units. This leads to higher unit cost and higher final price.

II. Break even pricing:

The firm determines the price at which it will make the target profit.

Procedure to calculate the break even volume:

1. Find out the total fixed cost of the company.

2. Determine the price at which company would like to sell

3. Calculate the variable cost per unit.

4. Determine the break even volume by the following formula

Break even volume= Fixed cost/ (Price- variable cost)

Procedure to identify breakeven price

1. Determine the unit demand needed to break even at a given price.

2. Find out the expected unit demand at given price.

3. Find out the total revenue at a given price.

4. Calculate the total cost ( assuming fixed cost and total of variable cost)

5. Determine the profit from the following formula

Profit= Total revenue – total cost.



Assume:

Fixed cost: Rs 1,000,000

Price: Rs 20

Variable cost: Rs 12

BEV = 1,000,000/ (20-12)

= 125,000.

Price

Unit demand

needed to break even

(i)

Expected unit

demand at given price

(ii)

Total revenue iii =

Price*

(ii)

Total cost iv( assumed fixed cost Rs 10 Lakh and constant variable

cost Rs 12) (iv)

Profit

v = iii – iv

Rs 16 250,000 340,000 4,800,000 5,080,000 -280,000

Rs 18 166,667 180,000 3,240,000 3,160,000 80,000

Rs 20 125,000 140,000 2,800,000 2,680,000 120,000

Rs 22 100,000 90,000 1,980,000 2,080,000 -100,000

Rs 24 83,333 60,000 1,440,000 1,720,000 -280,000

Rs. 20 is the ideal price to break even.

10.4 Value Based and Competition Based Pricing

1. Value based pricing: Setting the price of a product on the basis of

consumers‟ perceived value of the product rather than manufacturers‟ cost.

Difference between value based and competition based pricing

COST BASED PRICING

VALUE BASED PRICING

Product Cost Price Value Customers

Product Cost Price Value Customers



Cost based pricing starts with the development of product and prices are

fixed later. In case of value based pricing customers are given utmost

importance. In value based pricing method, the product is developed only

after the price and cost estimation. For example Company X that

manufactures electric switches develops the product and sets the price on

the basis of total cost and target return required. Company Y that

manufactures food products researches the consumer need and prepares

customer values. Then the company sets the price on the basis of customer

values.

Every day low pricing:

In this strategy, organization charges constant low prices and no temporary

discounts. This method is popularized by Wal-Mart.

High Low pricing:

Charging higher prices everyday but running frequent sales promotions to

lower the prices on temporary basis. For example, Products such as

deodorants, body sprays and other cosmetics are priced high but from time

to time there are offers like buy one get one free on such products.

2. Competition Based pricing: In this method a seller uses prices of

competing products as a benchmark instead of considering own costs or the

customer demand. Some techniques of competition based pricing are as

follows -

a) Destroyer Pricing

This strategy is used as an attempt to eliminate competition. It involves

lowering the prices of the company‟s products to an extent where

competition cannot compete and consequently they go out of business.

It is therefore important that one has to recognize how threatening the

competition is and research how competitive they can be with their

prices They may be able to compete with organization‟s price cuts and

consequently both, or just competitor may go out of business.

b) Price Matching or Going Rate Pricing

Many businesses feel that lowering prices to become more competitive

can be disastrous for them (and often very true!) and so instead, they

settle for a price that is close to their competitors. Any price movements

made by competition is then mirrored by the organization so long that

one can compensate for any reductions if they lower their price.

Field Code Changed

Field Code Changed

Field Code Changed

Field Code Changed

Field Code Changed

Field Code Changed

Field Code Changed

Field Code Changed

http://www.businessdictionary.com/definition/seller.html

http://www.businessdictionary.com/definition/use.html

http://www.businessdictionary.com/definition/price.html

http://www.businessdictionary.com/definition/competing.html

http://www.businessdictionary.com/definition/product.html

http://www.businessdictionary.com/definition/benchmark.html

http://www.businessdictionary.com/definition/costs.html

http://www.businessdictionary.com/definition/customer.html



c) Price Bidding or Close Bid Pricing

Price bidding is a strategy most common with manufacturing, building

and construction services. In this strategy, companies submit the

quotation according to the tender stipulations

Activity 2:

Select any local supplier who is dealing with a specific type of product

and find out his pricing strategies under situations: a) when competition is

more; b) when there is no competition; c) when demand is more than

supply; d) when there is no demand

Self Assessment Questions

1. Current profit maximization strategy is used to defend the ___________

2. Break even point occurs when

a. Total cost equals fixed cost

b. Total cost equals total revenue

c. Total cost equals variable cost

d. All the above

3. ______________ market consists of few number of sellers

a. Perfect market

b. Monopolistic

c. Oligopolistic

d. Monopoly

4. Unit cost equals to

a. Variable cost+ ( fixed cost/unit sales)

b. Fixed cost + ( variable cost/ unit sales)

c. (Variable cost+ fixed cost)/unit sales

d. All the above

5. Every day low pricing is

a. Value based pricing

b. Competition based pricing

c. Cost based pricing

d. All the above.



10.5 Product Mix Pricing Strategies

1. Product Line pricing: Strategy of setting the price for entire product line.

Marketer differentiates the price according to the range of products, i.e.

suppose the company is having three products in low, middle and high

end segment and prices the three products say at Rs 10 Rs 20 and

Rs 30 respectively.

Figure 10.1

NOKIA 1110 NOKIA 7610 NOKIA E90

Price: Rs 1349 Price Rs 6249 Price Rs 34599

In the above example of Nokia mobile phones Nokia 1110 is priced

@ Rs 1349, Nokia 7610 priced @ Rs 6249 and Nokia E90 priced

@ Rs 34599. All the three products cater to the different segments - low,

middle and high income group respectively. The three levels of

differentiation create three price points in the mind of consumer. The

task of marketer is to establish the perceived quality among the three

segments. If the customers do not find much difference between the

three brands, he/she may opt for low end products.

2. Optional Product pricing: this strategy is used to set the price of optional

or accessory products along with a main product.

Figure 10.2

Body cover

Rs 1521

Slide Molding

Rs 1123

Rear underbody

Rs 8883

Roof End

Rs 6396

Maruti Suzuki will not add above accessories to its product Swift but all

these are optional. Customer has to pay different prices as mentioned in



the picture for different products. Organizations separate these products

from main product so that customer should not perceive products are

costly. Once the customer comes to the show room, organization

explains the advantages of buying these accessory products.

3. Captive product pricing: Setting a price for a product that must be used

along with a main product. For example, Gillette sells low priced razors

but make money on the replacement cartridges.

4. By-product pricing: It is determining the price for by-products in order to

make the main product‟s price more attractive. For example, L.T.

Overseas, manufacturers of Dawaat basmati rice, found that processing

of rice results in two by-products i.e. rice husk and rice brain oil. If the

company sells husk and brain oil to other consumers, then company is

adopting by-product pricing.

5. Product bundle pricing: It is offering companies several products

together as a bundle at the reduced price. This strategy helps

companies to generate more volume, get rid of the unused products and

attract the price conscious consumer. This also helps in locking the

customer from purchasing the competitors‟ products. For example,

Anchor toothpaste and brush are offered together at lower prices.

10.6 Adjusting the Price of the Product

Competition has forced companies to adjust their base prices according to

the situations. There are basically five different types of pricing strategies

that companies adopt. They are

1. Discounts and allowances

2. Location pricing

3. Psychological pricing

4. Geographical pricing

5. International pricing

1. Discounts and allowances

Companies offer price reduction for the customers on the following

basis:

a. Cash discount is given when the customer makes early payment

before the due date. To explain, a manufacturer gave 21 days credit

to a grocery store person. If the customer pays the bill within 7 days,



company may ask him to pay 2% less than the actual amount.

b. Quantity discount is a price reduction to buyers who buy the

products in large quantities. Suppose a manufacture sells

submersible pumps for Rs 20,000, and if customer buys three

motors at one go, then he will reduce the price of the product to Rs

18,000.

c. Functional discount is offered when customer carries the

promotion or other marketing activities. To illustrate, a chemist will

be paid a nominal amount for displaying the company products or

promoting the company products.

d. Seasonal discount is usually offered when customer purchases the

product in the off season. For example, if customers purchase the

winter cloth in rainy season, then he/she will get discount on the total

products produced.

2. Location pricing is the method of setting the price of the product

according to the locations. Here company changes the price from one

location to another location though other cost remains the same. To

make it more clearer, company X is having two stores, one in a market

area and another in suburban area. It charges more in the market area

and less in the suburban area.

3. Psychological pricing: According to Kotler, psychological pricing is „a

pricing approach that considers the psychology of prices and not simply

the economics; the price is used to say something about the product.

For example, V. K. export sets Rs 299 and Rs 399 for their leather

product which in turn creates the impression that the price is in the range

of 200 rather than 300. Similar pricing strategy is observed in Jeans and

shoes.

Promotional pricing: Organizations set the price of their product below

the list price and sometimes even below cost. The objective of such

pricing is to achieve immediate sales, increase the customer footfall,

avoid the competition and introduce the product. Big Bazaar annual

clearance sale etc… is an example of this type of pricing.

4. Geographical pricing: setting the price on the basis of geographies

they are selling and freight charges. In this strategy, different options



exist for the company. They are

a. Freight charges to be paid by the customer (FOB or Free on Board

pricing) For example, when delivering a equipment from another

country or state, company will charge according to FOB price

b. Different zones have different prices, i.e. company may charge

different prices in south and north zone. (Zone pricing). For example,

MTR sells its products at different prices in different states.

c. Same price plus freight charges for all the customers (Uniform

delivered pricing). For example, when you place an order for Books,

its prices are fixed and also the freight charges.

5. International pricing: Organizations should consider the different

external factors and customer profiles in different countries before

arriving at a pricing strategy. It should adopt their products and their

prices according to that. For example, CIPLA sells its AIDS medicines

in Africa and America with different prices.

Apart from the above price adjustment strategies, companies also adopt

promotional pricing where prices of the products are lowered to a major

extent so as to attract sales. These price offers are given during off-

seasons, to clear old stocks, to balance over-production of goods or

whenever the market conditions demand for such strategy. For example,

Shoes, Dress materials, crockery items are sometimes sold at direct sale or

at factory rate. Even offers such as Buy one, get one free are regarded as

promotional pricing where at the price of one, consumer gets one more item.

10.7 Initiating and responding to the price changes

1. Initiating the price changes

Initiating the price cuts: Below certain situations are discussed when

organizations think of initiating the price cuts

a. Companies reduce their price when they have excess capacity.

b. Falling market share in the face of strong market competition

c. Dominate the market through lower costs.

Initiating price increases

a. Rising cost of raw materials.

b. Demand for the product exceeds the supply.



Buyer reactions to price changes

a. Reduced price means reduced quality

b. Reduced price means company is not selling the product as

expected.

c. Prices may go down further.

d. May avoid buying the product for some time

2. Responding to price changes

In the competitive world, other manufacturers sometimes initiate the

price changes. In such case the company should analyze two situations

If the price cut of other company is not affecting our company, then

hold current price and monitor the market. This situation helps to

keep the profitability of the company.

If the price change of other company affects the company, then it

should take any one of the following steps

a. Reduce the price of the product on par with competition or below

the competition.

b. Increase the perceived quality of company and product.

c. Improve the quality of the product and then increase the price.

d. Launch different brand which can fight in the lower end.

Self Assessment Questions

6. ____________ Strategy is used to set a price for a product that must be

used along with a main product.

7. The pricing strategy in which company sells its several products at

reduced price

a. Bundle pricing

b. By product pricing

c. Captive pricing

d. Options pricing

8. Razor and cartridge example indicates

a. Bundle pricing

b. By product pricing

c. Captive pricing

d. Options pricing



9. FOB pricing is an example of

a. Promotion pricing

b. International pricing

c. Discounts and allowances

d. None of these

10. ___________ is given when the customer makes early payment before

the due date.

10.8 Summary

There are four major objectives on which prices are determined. They

are survival, current profit maximization

The break even point for a product is the point where total revenue

received equals the total costs associated with the sale of the product

(TR=TC).

The price elasticity of demand is defined as percentage change in

quantity demanded to the percentage change in the price.

Optional Product pricing strategy is used to set the price of optional or

accessory products along with a main product.

By product pricing is determining the price for by products in order to

make the main product‟s price more attractive

Product bundle pricing is offering companies several products together

at the reduced price.

List of Key terms

Monopoly

Perfect competition

Oligopolistic competition

Break-even pricing

Pricing strategies

Total cost

10.9 Terminal Questions

1. Discuss the factors that influence price decisions

2. Write a note on cost based pricing.

3. Explain value based and competition based pricing.

4. How should organizations adjust their prices of the product?

5. Write a note on product mix pricing strategies.

Field Code Changed

Field Code Changed

/wiki/Breakeven

/wiki/Product_%28business%29



10.10 Answers

Answers to Self Assessment Questions:

1. Market position.

2. Total cost equals total revenue.

3. Oligopolistic

4. Variable cost+ ( fixed cost/unit sales)

5. Value based pricing

6. Optional product pricing

7. Bundle pricing

8. Captive pricing

9. None of these

10. Cash discount

Answer to Terminal Questions:

1. Refer 10.2

2. Refer 10.3

3. Refer 10.4

4. Refer 10.6

5. Refer 10.5

10.11 Mini-Case:

Price Plus

No exchange, No bond or post-dated cheque. Simple redemption. Bonus

profit, announced the tag-line of a full-page ad in one of the capital‟s leading

English language dailies. No, the ad is not there to sell fixed deposit

coupons for some non-banking financial company or even the much

maligned „teak bonds‟ for some obscure plantation company. Instead it

spells out in vivid details; now hold your breath, on how good money can be

made almost six years down the line by buying an Akai color television

today!

Flip a few pages, and there is yet another one of them, this time from

Videocon, which announces it as the “Greatest Money Back Offer”. The



superlative here, it seems, is only an age-old advertiser‟s tendency to

exaggerate.

But get the subtle drift. It is no longer your television against mine. Or even

your technology against mine. Or even your brand against mine. But my

„financial offer‟ against everyone else‟s! For that is what marketing, or

whatever we understood of it, in the consumer durable market has been

reduced to. Simply, and some would add sadly, an act of „financial

drudgery‟, re-engineering if you like.

Well, we should see it coming. First, it was the bundling. Don‟t just sell a

television set alone-throw in the CD video and audio player, high-wattage

speakers and call it a „home theater‟ or something of the sort. Never mind, if

the consumer is completely flummoxed (or stumped) on the individual value

of the respective elements.

Then came, bundling by any other name, brand associations. So you had a

hotchpotch of refrigerators, washing machines and television brands

peddled as the home-maker of sort. Akai initiated „exchange mania‟ – your

old television for new-almost became marketing currency with durable

marketers across the board.

But, what takes the cake, is the latest „money back‟ salvo from Akai and

Videocon? Amidst all these „innovative approaches‟, whatever happened to

good old classical marketing and branding?

“To justify the blatant disregard for accepted consumer marketing, these

durable marketers are terming it as redefinition in consumer value. In fact,

their version of it is essentially a function of just price. They have thrown all

concepts of branding to the wind,” adds Suhel Seth, CEO, Equus

Advertising. Simply put, consumer value cannot be on mere price corollary;

it has other elements to it.

“You need to look at this phenomenon from the category‟s lifecycle-I have

seen it happening with all sorts of categories, tyres for instance, “opines

Vinayaka Chatterjee, Chairman, Feedback Ventures Private Ltd.

“Ultimately, two things will happen. One, some people may not find it

worthwhile to operate in such a market, and then some degree of shake-out

may happen. Plus, demand perk up in the future will somewhat restore

demand supply imbalance. And then back to old classical marketing games.



However, there is another school of thought which is more charitable.“

Marketing looks at making sure to create consumers in the short, medium

and in the long run. Akai is doing fine on the short and the medium levels. I

think it will be a player in the long run as well,” adds Shumu Sen of Quadra

Consultants.

Even others agree on the fact that such „innovative offers‟ have managed to

attract a very basic need oriented consumer. But what beyond that? “In the

long run, brands have to be built,” adds Seth. The moot question, however,

remains whether or not brands such as Akai are able to sustain themselves

on any „offer‟?

Such offers may bring relevance (price-related) and even salience (schemes

advertising related) to the brand. But, what about consumer empathy and

esteem, that‟s so very essential for the survival of the brand in the long run?

That can be only built working around the entire spectrum of the marketing

rainbow, and not just on price,” adds Rajeev Karwal, Vice-President,

Marketing and Sales, LG India Electronics Pvt. Ltd.

“My hypothesis is that you can turn a brand into a commodity and sell it on

price sensitivity, the way Akai is doing. But over the time the game perforce

has come back to the brand,” adds Gautam Bhattacharya, professor of

marketing at a New Delhi-based management institute.

“Marketing is about creating consumer empathy with the brand. When the

consumer feels that „this is my brand‟, adds Karwal, where is that

quintessential quality of marketing in today‟s consumer durable market? Or

are we to live forever with age-old adage, “There‟s no brand loyalty which

two cents off can‟t overtake.”

In the era of price-war the questionable issue is whether marketers

formulate their strategies on price or value for money and secondly whether

consumers end up paying more than they bargained for. Analyze this issue

in the current scenario of price wars.

(Source: „Price Plus‟ – case study; Cases and Simulations in Marketing

Management edited by Prof. M.K. Rampal and Dr. S.L. Gupta)

slm-unit-10-mb0046

Documents

sikkim manipal university

day low pricing

market share leadership

current profit maximization

fixed cost unit sales

cost based pricing

competition based pricing

high quality product