Price As A Competitive Advantage

0 %
100 %
Information about Price As A Competitive Advantage
Business & Mgmt

Published on March 3, 2009

Author: pankajprabhakar4u

Source: slideshare.net

Description

Marketing

PRICE AS A COMPETITIVE ADVANTAGE PREPARED BY :- Pankaj Prabhakar

OBJECTIVE To study the pricing policies of companies. To study the low price influences customer.

To study the pricing policies of companies.

To study the low price influences customer.

Price as a competitive advantage - Definition A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

INTRODUCTION TO PRICING Q-What is price? FROM CUSTOMER POINT OF VIEW :- Price is the sum of all values that a consumer willing to pay in order to gain the benefit of having or using the product or service. FROM PRODUCER POINT OF VIEW :- Price is the sum of money charged by producer which incurs cost of producing that unit and the profit margin. Price is also central to marketing where it is one of four variables in the marketing mix that business people use to develop a marketing plan.

Q-What is price?

FROM CUSTOMER POINT OF VIEW :-

Price is the sum of all values that a consumer willing to pay in order to gain the benefit of having or using the product or service.

FROM PRODUCER POINT OF VIEW :-

Price is the sum of money charged by producer which incurs cost of producing that unit and the profit margin.

Price is also central to marketing where it is one of four variables in the marketing mix that business people use to develop a marketing plan.

FACTORS TO BE CONSIDER WHILE PRICING A PRODUCT Objectives and the product portfolio - Every business should have a series of objectives relating to sales, profits, market share and return on capital. The business objectives might be such that it calls for short term profits. Product Positioning - The term product positioning has already been explained. It is a very important concept in setting the price of the product. It is clearly very foolish to position a product as a high quality exclusive item, and then price it too low.

Objectives and the product portfolio -

Every business should have a series of objectives relating to sales, profits, market share and return on capital. The business objectives might be such that it calls for short term profits.

Product Positioning -

The term product positioning has already been explained. It is a very important concept in setting the price of the product. It is clearly very foolish to position a product as a high quality exclusive item, and then price it too low.

Is the product substitutable ? The uniqueness of a product directly correlates with its pricing power. Does the product have a strong brand name ? As human beings, we identify and become extremely attached to brands, bestowing substantial pricing power upon the brand-owner. Are you offering value for the money ? Customers may value other attributes more than low price — for example, greater selection, longer product life, faster delivery, greater reliability, lavish after-sale service, better location, more attractive terms or reduced risk of defect. COST OF THE PRODUCT - In this approach to setting price, we first determine the markup and then add it to the cost to find the selling price. That is, we simply multiply the cost by the percentage of markup.

Is the product substitutable ? The uniqueness of a product directly correlates with its pricing power.

Does the product have a strong brand name ? As human beings, we identify and become extremely attached to brands, bestowing substantial pricing power upon the brand-owner.

Are you offering value for the money ? Customers may value other attributes more than low price — for example, greater selection, longer product life, faster delivery, greater reliability, lavish after-sale service, better location, more attractive terms or reduced risk of defect.

COST OF THE PRODUCT -

In this approach to setting price, we first determine the markup and then add it to the cost to find the selling price. That is, we simply multiply the cost by the percentage of markup.

Product Life Cycle Sales & Profits ($) Time Product Develop- Ment Stage Losses- Investment ($) Intro- duction Growth Maturity Decline Sales Profits

Product Life Cycle

PRICING STRATEGIES :-

Premium pricing :- Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. Creaming or skimming :- Selling a product at a high price, sacrificing high sales to gain a high profit, therefore ‘skimming’ the market. This strategy is often used to target "early adopters" of a product/service. Penetration Pricing :- The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV . Economy Pricing :- This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Premium pricing :-

Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price.

Creaming or skimming :-

Selling a product at a high price, sacrificing high sales to gain a high profit, therefore ‘skimming’ the market. This strategy is often used to target "early adopters" of a product/service.

Penetration Pricing :-

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV .

Economy Pricing :-

This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Other Strategies Cost Leadership :- With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. Differentiation Strategy :- Differentiation is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customers service.

Cost Leadership :-

With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs.

Differentiation Strategy :-

Differentiation is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customers service.

Low price strategy example :- TATA’S Nano -

Product differentiation (high price) :- Example: The Mercedes-Benz

Example:

The Mercedes-Benz

CONCLUSION :- From above discussions and examples we can conclude that the price strategy whether it is high such as in Mercedes case and low price in NANO plays as a role of competitive advantage. Price is main factor which influence the sale of any product it depends upon the perception of consumer. Price should be set by the company in such a way that it should give value to customer.

From above discussions and examples we can conclude that the price strategy whether it is high such as in Mercedes case and low price in NANO plays as a role of competitive advantage. Price is main factor which influence the sale of any product it depends upon the perception of consumer. Price should be set by the company in such a way that it should give value to customer.

THANK YOU

Add a comment

Related presentations

Related pages

Competitive advantage - Wikipedia, the free encyclopedia

Competitive advantage is a business concept describing ... Deciding on the appropriate price and quality will depend along the business ...
Read more

Types of Competitive Advantage: Cost, Product, Niche ...

Learn about competitive advantage and ... Cost, Product, Niche & Sustainable Advantages. ... Intel is able to keep microchip processor prices down by ...
Read more

Competitive Advantage Definition | Investopedia

BREAKING DOWN 'Competitive Advantage' Competitive advantages give a company ... the competitive advantage, ... at a lower price than its ...
Read more

Pricing It Right: Using Price As Your Competitive Advantage

One of the most important things you need to consider as you prepare to take a product or service to market is, “What is my competitive advantage?”
Read more

Competitive Advantage - QuickMBA: Accounting, Business Law ...

Definition of competitive advantage and a ... Implications for offensive and defensive competitive strategy; Competitive Advantage makes these concepts ...
Read more

What is competitive advantage? definition and meaning

Definition of competitive advantage: ... the same value as its competitors but at a lower price, ... Buffett's term for durable competitive advantages.
Read more

Competitive Advantage - strategy, style, advantages ...

... benefits that justify a higher price. The strongest competitive advantage is a strategy ... several potential competitive advantages, ...
Read more

Consider This -- Using Pricing as a Competitive Advantage

... Using Pricing as a Competitive Advantage. ... competitive data was the ... with both margin-optimized and competitive prices, ...
Read more

Competitive Advantage | Strategic Management Insight

What is Competitive advantage? ... Nearly everything can be considered as competitive ... company sells products at the same price as competitors but ...
Read more