Ditch the discounts

Ditch the Discounts

If the economy is showing signs of life, the recent unemployment numbers are encouraging. Your company probably took a serious margin hit duringthe recession and now input costs are rising. So here you are, sitting at yourdesk thinking, “Given this market environment, I need to revamp my pricing strategy…but what should I do?”  This slide is to help you price for profits and growth.

What’s wrong with discounts?

Discounting your establishedbrands tells the market two things: your prices were too high before, and your products won’t be worth the price in the future once the discounts are gone

What smart companies do: Adapting The Price

different customers have different needs and therefore place different values on a given product or service

When it comes to adaptive pricing, it’s tough to beat the airline and hotel industries

What a Company should do?

“It’s time to Reprice for recovery”

But how?

Introduce Lower-Priced Versions

Stadium

Use Promotions to Avoid Price Drops

Adapt Products to Maintain Affordabilitydecrease product size or volume

Unbundle Services And Add Extra Fees

Withdraw Recession-Pricing Tactics

Tide Basic, launched in 2009, cost 20% less than regular Tide

Introduce New Premium Products

Increase the Price of Regular Products

Offer New Ways to Experience Luxury

Some examples

Hyundai let buyers wholost their jobs returntheir vehicles. It thusavoided further pricecuts—and in nine months,fewer than 50 vehicleswere returned

Some examples

A midweek special in a restaurant

The perceived value of a product as simple as a black T-shirt depends in part on where it is sold

Some Examples

Because of its high standards for quality and continual innovation, PACCAR can charge a premium for its trucks

Some Examples

Application in Indian Market

Telecom Companies

They unbundle their services and then keep extra charges on each service they provide like

tariff plan, data plan etc.

Oil and Soap Companies

They reduce the product volume and thus reduce manufacturing cost result in higher profit

CLOTH SHOWROOM

Sometimes they offer one free set of cloth if you buy two or three set

News Paper

On a Particular day they offer something special and charge extra for this-like Hindustan Times ”Sunday Special”

Kingfisher(Airline)

They offer new ways to experience luxury and charge higher than usual for same

Cinema hall

They charge money based on location of place from where you are watching the movie

Indian Railway

Indian Railway offers seasonal ticket for short distances as a method of “Pricing strategy”

Subway

Subway offers simple sandwich which costs less than special sandwich

Digital coupons

Digital coupons such as these, available at Coupons.com,have grown in importance

Coca-Cola

Coca-Cola Believes in Promotional Pricing

Apple- highly differentiated product

Apple can increase price of it’s products based on their excellent quality

Music Band

They decide the price on the basis of how many and which performer you want to see

Summary

After Recession it’s very necessary to Reprice for recovering growth and profit of the company. This presentation shows how to price in this situation in Indian market as well as world market with ditching the discount. Some common pricing methods are: Introduce Lower-Priced Versions Use Promotions to Avoid Price Drops Adapt Products to Maintain Affordability Unbundle Services And Add Extra Fee Withdraw Recession-Pricing Tactics Introduce New Premium Products Increase the Price of Regular Products Offer New Ways to Experience Luxury

Credit

KOTLER, P. & KELLER, K. 2011. Marketing Management 14th Edition,Upper Saddle River, NJ, Prentice Hall.

Rafi Mohammed, “Ditch the discounts”,Harvard Business Review, Jan-Feb, 2011, p. 23-25.

Eric Mitchell, “How Not to Raise Prices,” Small Business Reports, November 1990, pp. 64–67. (With due thanks to the owners of Photographs)