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Rural Pricing

Pricing In Rural India


Pricing amount of money charged for a product or service Pricing reflects demand for a product Element of market mix generating income Strategic determines positioning Affects decisions on product attributes, channels, promotion 1983 sachet revolution low unit-price, value for money affordability maximum people to try product FMCG & food products Rising incomes purchasing power aspirations (health, better life, better future Challenge good quality aspirational products affordable price

Pricing decisions by companies


Critical too high too low Rural value for money Meet customer expectations raise profits Target pricing fix at product design & development stage Fix ideal price ensure met

Consumer psychology & pricing


Value for money not cheap good quality for money they spend Consumer durables basic functions few features Based on reference price memory, same shelf, same product line

Setting the price for Rural Products & Services


Internal Factors Cost Pricing Objective of company External Factors Price sensitivity of customer Channel costs Competition Environment

Internal Factors - Cost


Fixed costs, variable costs Packaging, SKUs Promotional costs mass media, newspaper low touch & feel haats, melas, mandis Distribution channel Project Shakthi, Project Bharath, e-Choupal

Internal Factors Pricing objectives of the Company


Compatible target market selection product positioning Trade off quality- price Price based completion Non-price based promotion or availability Customer involvement nature of competition

Profit maximization in long run penetration pricing lower than eventual market price

Minimum returns on sales turnover


Initial recover costs in production, distribution , dealer margins Deeper penetration Expansion Tiger brand at Rs 1, 2 & 4 vs Glucon D and Parle Marie

Keeping up with the competition Lower cost production, lower channel costs
Regional players low production & distribution costs

Increasing sales volume & market share


Sets acceptable level of profitability maximises sales Cost intensive strategy economies of scale low R&D, distribution and market mix Works for price sensitive categories growth stage of PLC Chick 50 paisa sachets (replaces Rs 2)

External Facors
Price sensitivity of customers
Customers assess value & also price Market research to determine price points Reluctant to try new products Selects SKU which gives volume for money Based on personal, social, economic & geographic characters, mode and timing of payment (Honda dealer kitty system) Durable goods promoted harvest & wedding season Agri inputs & wedding items go for quality

Channel Costs
Compatibility of target customers retail format mode of payment (village retail shop credit; haat retail on cash; mobile traders credit to regulars) Elimination of sub-stockist mobile traders, SHG, haats

Competition
Compare prises of competitors Market leader sets price

Environment
Govt. Policy tax benefits, subsidies, low interest, market (Nirma ,SME , excise backward integration economies of scale non-mechanised production, no electricity,tax less cottage industry, no min. wages) Economy poor monsoon, crop failures New technology Chotukool, Dish TV (low cost set top), Nokia 1100, GE baby warmer, Videocon washing machine without drier, Philips smokeless chulas

Price Setting Strategies


Market Entry Strategies Skimming pricing high initial, lower later P&G Ariel, Tide Penetration pricing low to get share, volumes Product Mix Pricing Strategies Optional-product pricing high prices for service & spare parts Captive-product pricing high price for products that must be used along with main product blades two parts: fixed & variable Product-bundle pricing several products in bundle at lower rates (festive, marriage season, during inflation)

Price Adjustment Strategies Discounts & Allowance Pricing cash discount, volume discount caution Freebies free gift compatible toothbrush with paste Special-event pricing - harvest, wedding, festivals Economy pricing- no frills product. Maharaja home appliances. LG TV. Rajdooth m/cycle Value pricing Ajantha veg. toothpaste Psychological pricing product quality = price, snob value Discriminatory pricing selling same product at different prices customer segment (cash & credit), different versions or forms (sold loose at higher price), different locations (towns, villages, haats)

Rural-specific pricing strategies Low price points daily needs penetration product freshness variety of products Low-cost packaging simple, cheap packaging Refillable / re-usable packs bags, jars Highlight value, not price Hero Honda Coinage pricing shortage of change Product-sharing services Rasoi Ghar