Saturday, 5 October 2013

Pricing Decision

Pricing
Pricing is the process in which we figure out what amount to attach to each unit. Everything that a customer has to pay in order to acquire goods and services. Pricing should also be consistent with the other elements of marketing mix, since it contribute to the perception of a product or a service by a consumer.
Price of a product or service influence the buying decision of a consumer

Consumer Buying Psychology:

Reference Price- A reference price is a price which a customer think is reasonable for a certain type of product or service. The reference price depends upon several factors like
  •  Memory of the past price,
  •  Competitive frame of reference,
  •  Price of other product in the same shelf, in the same category or in the same product line,
  •  The way the price is presented for instance absolute numbers verses per quarter, per pound, per hour of use, per application, etc
  • The order in which people see a range of price
For example- For 80 ml Pantene shampoo bottle the price is Rs 64 and for a 80 ml Head & Shoulders bottle it is Rs 69. So the consumer will have a price range for a 80 ml shampoo bottle in between  Rs 65 and 70. Hence the company has to keep its product price in this range only in order to take care of the competition and profit.


Price-Quality Inference- Consumer develop belief about the correlation between price and quality from their own consumption experiences. For a given product category, some consumers believe that price and quality are highly correlated whereas other consumer believe that price and quality are not highly correlated. Furthermore, the inferences of quality  they make on the basis of price can influence their actual pricing decision. For example- Perfumes, Watches etc

Price cue- It is defined as any marketing strategies used by the firm or the company to create the perception that the current price offer good value compared to competitor's price, past price and future price. Some of the pricing tactics are placing a  sign at the point of purchase claiming an item is on "SALE", and quoting a price that will end at "9", Pricing Guarantees etc.

 Pricing For Head & Shoulders
Initially when Head & Shoulder were formed it used to come in bottle and it increase in sales it initially reduced its market price and also started making shampoo sachet which helped them gain profit. There were number of advantages of using sachet was you get to use variety of product, you don't have to worry about unsealed products. Despite of having so many competition in the same category Head & Shoulders make sure it live up to its brand name with affordable prices and better quality that will appeal large masses.
The current price of Head & Shoulders Shampoos:-
  • 90 ml- Rs 69
  • 170 ml-Rs 135
  • 375 ml-Rs 254
  • 675 ml-Rs 399

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