1. pricing for profit-2014.pptx

8/14/2019 1. Pricing For Profit-2014.pptx

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SIIB-MBA(IB)

Buying Chai Shopping at the Mall Paying College Fees

Paying for Talk Time Buying Petrol Buying Sabzi


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PRICING

What are your expectations from this course?


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Group Norms

1. No Mobiles No Laptops

2. No faraway looks

3. No disoriented behavior

4. Intense Participation

5. No monopolizing last benches

6. Ask any questions-No questions are foolish. Challenge your faculty

7. Learn from each other


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The Power & Importance of Pricing




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CONTENTTOPIC From To

Profitable Pricing 09:00 11:00


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Formulating Strategies 09:00 11:00


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Debate- Indigo Airlines 09:00 11:00


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Pricing Laws- 9 Laws 09:00 11:00


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Price Segmentation 09:00 11:00


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Customers- The Role Of Price & Value 09:00 11:00


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Price Sensitivity + Horlicks Oatmeal Debate09:00 11:00


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Costing09:00 11:00


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Costing09:00 11:00

Financial Analysis09:00 11:00


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Costing09:00 11:00


Negotiation SkillsRole Plays09:00 11:00


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Costing09:00 11:00



Negotiation Skills-Role Plays09:00 11:00


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Costing09:00 11:00




Price CompetitionCase Study Auto Industry09:00 11:00


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Costing09:00 11:00





Psychological Aspects of Pricing09:00 11:00


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Costing09:00 11:00






Legal & Ethical Issues09:00 11:00


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Costing09:00 11:00







Final Round Up

09:00 11:00


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Costing09:00 11:00







Final Round Up

09:00 11:00

ALL PRESENTATIONS


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TEAMSExpectations

1. Teams of 4 People- with a Team Leader

2. Teams will make a Presentations on the topics-20 mins per team

3. Study the topic in advance

4. Your Presentation should cover knowledge gathered from

a. Your Reading (Library, Google, Text Books)

b. Your Summer Training Experience

c. Your own common sense thru practical observations

5. 20 Marks for the Presentationa. Preparation-Rigour

b. Analysis

c. Team Sharing


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CONTENTTOPIC Team Nos Team Leader From To

Profitable Pricing SELF 09:00 11:00

Formulating Strategies Divij/Kartik 09:00 11:00

Debate- Indigo Airlines Neha/Debdeep

Pricing Laws- 9 Laws JD

Price Segmentation Anshu/

Customers- The Role Of Price & Value Somil

Price Sensitivity + Horlicks Oatmeal Debate Ankit/Ash

Costing Senthil

Financial Analysis Rohan

Negotiation SkillsRole Plays Sahil/K Anand

Negotiation Skills-Role Plays Jay

Price CompetitionCase Study Auto Industry ALL

Psychological Aspects of Pricing-Case Study ALL

Legal & Ethical Issues ALL

Final Round Up ALL


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Evaluation Criteria

ASSESSMENT

COMPONENTS

MARKS CRITERIA SET BY PROPOSED

WEEK/DATE OF

EXAM

Written

Test/Online Test-1

10 SIU Week of 2nd

September


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Evaluation Criteria

ASSESSMENT

COMPONENTS


WEEK/DATE OF

EXAM

Written

Test/Online Test-1

10 SIU Week of 2nd

September

Written

Test/Online Test-2

10 SIU Week of 14th

October


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Evaluation Criteria

ASSESSMENT

COMPONENTS


WEEK/DATE OF

EXAM

Written

Test/Online Test-1

10 SIU Week of 2nd

September

Written

Test/Online Test-2

10 SIU Week of 14th

October

Group

Assignments

20 Faculty Continuous


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Evaluation Criteria

ASSESSMENT

COMPONENTS


WEEK/DATE OF

EXAM

Written

Test/Online Test-1

10 SIU Week of 2nd

September

Written

Test/Online Test-2

10 SIU Week of 14th

October

Group

Assignments


ClassParticipation 20 Faculty Continuous


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Evaluation Criteria

ASSESSMENT

COMPONENTS


WEEK/DATE OF

EXAM

Written

Test/Online Test-1

10 SIU Week of 2nd

September

Written

Test/Online Test-2

10 SIU Week of 14th

October

Group

Assignments


FinalPresentations 20 Faculty 1st

October

External

Evaluation

40 SIU

TOTAL 100


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Text Books

Strategies and Tactics of Pricing, Nagle and Hogan, Pearson

The World Of Pricing New DimensionsBy Rao Pramod Au. /Gadhawe Sarika Au. Hyderabad / Icfai Press

The Price Is WrongBy Maxwell Sarah Au. New Jersey / John Wiley &Sons / 2008

Pricingby Landsburg Steven e au. New delhi / cengage learning /2008


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SIIB-MBA(IB)




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Which is more important?

Pricingis THE

MOST

IMPORTANT

VARIABLE

in the MarketingMix

Product, Place

and Promotion

are FAR MORE

IMPORTANT than

PRICE


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Pricing (PRICE) is the most important!

Gillette

1984 to 1993 they managed with only the7 O'Clock Brand Double Edge Blades


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Gillette

1984 to 1993 they managed with only the

7 O'Clock Brand Double Edge Blades

1993 Launched Gillette Presto Readyshaver.

Wanted to use Presto to ladder up to Sensor & Sensor

Excell


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Gillette





Excell

Bombed!!

India was not ready for a DISPOSABLE Razorthat to at a Price of Rs 8 per

unit


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Gillette





Excell

Bombed!!

India was not ready for a DISPOSABLE Razorthat to at a Price of Rs 8 per unit

Gillette Brand Name was fine (Branding)

Product was excellent. You needed just ONE shave for a smooth finish (Product)

Excellent Advertising (Promotion)Great Availability (Distribution)

Only Pricing was the issue and that created the downfall


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Britannia-NutriChoice

NutriChoice

Rs 25

for

100 gms

Parle-G

Rs 6

for

100 gms


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BISCUIT INDUSTRY

Sales

Glucose-5500 Cr

Cookies-2200 Cr

Cream-2200 Cr

Marie-1000 Cr

Digestive-100 Cr!


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Pricing Is King!

Mum-Del

0550 Flight

TOMORROW

JET Rs 8007

INDIGO Rs 8006


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Pricing Is King!

Mum-Del

0550 Flight

TOMORROW 1 WEEK LATER

JET Rs 8007 Rs 5861

INDIGO Rs 8006 Rs 5790


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Pricing Is King!

Mum-Del

0550 Flight

TOMORROW 1 WEEK LATER 1 MONTH LATER

JET Rs 8007 Rs 5861 Rs 4883

INDIGO Rs 8006 Rs 5790 Rs 4883

Its all commoditizedWho cares for the airlinegive me a good price!


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Sales Promotion (PLACE) is the most important!

DISMISSED HONDA-SISSYSCOOTER

PLASTIC-DISINTEGRATE

ON

LONG

DISTANCE.


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Sales Promotion (PLACE) is the most important!

DISMISSED HONDA-SISSYSCOOTER

PLASTIC-DISINTEGRATE

ON

LONG

DISTANCE.

Kinetic Honda - goaround in circles in a

Pune Stadium for 24 hours

Drivers changed

every 2 hours Engine

Kept running. Petrol wasfilled -engine was running.

Kinetic Honda

proved all its detractors

wrong by running without

a hitch for 24 hours thusproving that it was a light

weight, modern and

technologically advanced

scooter.


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Distribution (PLACE) is the most important!

COMPANY DISTRIBUTION SALES (Rs Cr)

INDIA 90 Lac Outlets (2012ACN)

HUL 75 Lac Outlets 25000

P&G 70 Lac Outlets 6000

DABUR 55 Lac Outlets 4300


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MARKETING MIX

Pricing is AS important as the other 3 elements

of the Marketing Mix but the MOST important

one as far as Profits are concerned


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MARKETING MIX

Pricing is AS important as the other 3 elements

of the Marketing Mix but the MOST important

one as far as Profits are concerned

Agree?


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Pricing For Profits

How important is it to be a PROFITABLE Company?


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Pricing For Profits

How important is it to be a PROFITABLE Company?

1. Continuity of Business

2. Remunerate Land, Labor, Loans and Owners

3. For Development of New Business

4. For Contingencies


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Pricing For Profits

How do we increase profits?


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Pricing For Profits


1. By Increasing Volumes


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Pricing For Profits



2. By Reducing Variable Costs


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Pricing For Profits




3. By Reducing Fixed Costs


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Pricing For Profits




3. By Reducing Fixed Costs

4. By Increasing Price


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The 20% Improvement

U N I T S PRICE/ V A L U E

U N I T

SP 10 5.00 50

VC 10 2.00 20

FC 10

Less CP 10 3.00 30

= Prof it 10 2.00 20


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Pricing For Profits

1. Line 1-Volume

2. Line 2-Variable Costs

3. Line 3-Fixed Costs

4. Line 4- Price


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Pricing For Profits

1. Line 1-Volume

2. Line 2-Variable Costs

3. Line 3-Fixed Costs

4. Line 4- Price

Suppose we improve a Line by 20 %, which Line

will give us the best outcome?


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The 20% Improvement

BY 20% Profit IMPROVES BY %

Decr VC 20 20

Decr FC 20 10

Incr Vol 20 30

Increase Price 20 50

1%

Improve

Creates

Operating


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Improve

ment

in

Operating

Profit

Improvement

OfPROFIT LEVERS

2463 Companies surveyed by Compustat-a Financial Market intellegence Firm

1%

Improve

Creates

Operating


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Improve

ment

in

Fixed

Cost

Operating

Profit

Improvement

OfPROFIT LEVERS

2.3%


1% Creates


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1%

Improve

ment

in

Fixed

Cost

Volume

Operating

Profit

Improvement

Of

PROFIT LEVERS

2.3%

3.3%

1% Creates


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1%

Improve

ment

in

Fixed

Cost

Variable

Cost

Volume

Operating

Profit

Improvement

Of

PROFIT LEVERS

2.3%

3.3%

7.8%

1% Creates


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1%

Improve

ment

in

Fixed

Cost

Variable

Cost

Volume

Price

Operating

Profit

Improvement

Of

PROFIT LEVERS

2.3%

3.3%

7.8%

11.1%

1% Creates


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1%

Improve

ment

in

Fixed

Cost

Variable

Cost

Volume

Price

Operating

Profit

Improvement

Of

PROFIT LEVERS

2.3%

3.3%

7.8%

11.1%



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Why do Companies fail to use this lever successfully?


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POCKET PRICE WATERFALL


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POCKET PRICE: The Price that actually comes

into your pocket


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POCKET PRICE: The Price that actually comes

into your pocket

WATERFALL: Just like the Waterfall starts with a

small trickle, so also Price Erosion-DISCOUNTS- starts

with a small leak which converts into a waterfall


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How many different DISCOUNTS have you heard of ?


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How many different DISCOUNTS have you heard of ?

Discounts

Rebates

Subsidies

Schemes

Bonus


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Dealer List Price 100


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Less Qty Discount-1% 1 1



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Less Cash Discount-1.5% 1.5 2.5



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Invoice Price 97.5



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Invoice Price 97.5

Less Van Subsidy-1% 1.5

4



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Invoice Price 97.5


4Less Quarterly Purchase

Scheme (QPS)-2%

2 6



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Invoice Price 97.5



Scheme (QPS)-2%

2 6

Less Dealer Salesman

Subsidy-1%

1 7


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Invoice Price 97.5



Scheme (QPS)-2%

2 6

Less Dealer Salesman

Subsidy-1%

1 7

Less Local Advertising-2% 2 9Less Market Returns-1% 1

10Pocket Price 90


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LEARNINGS FOR TODAY

1. 4 Levers for increasing Profits

2. Price is the most powerful lever in increasing Profit

3. Why companies dont avail of this lever completely

4. Pocket Pricing-The price that finally comes into ones pocket

5. Pocket Pricing Waterfall-Discounts that start as a trickle become a

waterfall reducing the pocket pricing

6. Which element of the 4Ps is the most important7. Why are Profits important?

N S i


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Next Session

T1: Loss Leader & SunfeastT2: Nestle SLIM & Evian

20 minutes presentation per team

20 Marks for the Presentation

a. Preparation-Rigor

b. Analysis

c. Team Sharing

Your Presentation should cover knowledge gathered from

a. Your Reading (Library, Google, Text Books)

b. Your Summer Training Experience

c. Your own common sense thru practical observations

1. pricing for profit-2014.pptx

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