PRICE AS A MARKETING TOOL

PRICE AS A MARKETING TOOL

Price has two fuctions in marketing

n To recover investment and cover opportunities costs.

n It can also determine the market strategy where focus must be on volumes or margins, but the most significant principle is price performance points (PPP)

Conjoint Analysis: It is an important part of marketing strategy involiving price distribution. Porter suggests that margin route has low volume with high prices and is able to cover the cost, low volumes sale is able to give significant profit. The decision to go with volumes is driven by the fact of large volume push down. A company like Wall-Mart eliminates all unnecessary input cost to sell products 20%- 30% below market price. Wall-Mart makes sacrifices- sale support, overhead cost and design, warehousing costs by creating space within. Coz it has a high footfall ( nos of persons buying) it can bargain for heavy discount from supplies. This principle applies to low cost airlines also.

Price used as a marketing strategy must be used carefully. In globalization every culture looks at products differently. Pricing is a mkting tool, subject to different rules and categories of products for different age and different cultures by certain amt of standerization due to modernization.

A pair of Levis in the US is about 40-50$ and the same pair would be about 60-80$ in Europe. This is because in Europe Levis is perceived as a premium brand. Pricing in India uses psychology pricing (Rs.99). Pricing is abt optimum utilization of mkt sentiments and expectations.

Apple uses skimming method. When it comes out with a product it has a high price and as other companies come out with their own counter products Apple lowers the price of their products.

When Diet Coke came out Coke-cola droped it’s price to 30% coz it belived that lower prices would get people hooked.

Polaroid and Gillette use the capitalist strategy that is its main product may be very cheap but the accessories are expensive.

Value pricing have 2 different kinds of meaning

n Higher price suggest higher quality or an aspirational orientation

Also mean money pricing