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To avoid this competition from both sides, company would normally restrain itself from any price change. This would in turn led to a compromise with quality.
Conclusion
It has been rightly said, "Pricing is more than just about numbers; it is a play on perception." - Anonymous.
Indian consumer is constantly on the look out for better value for money and if he perceives something to be worth, he will buy it. The price plays an important role in the sense; each price point has a perception in the minds of a consumer. For example - one can easily say, for an Indian customer which idea would click of these two: -
Take home a Maruti Car at Rs.100 per day.
Take home a Maruti Car at Rs.36,500 per year.
Many consumers are not so concerned about the grammage as much as price. A relatively bigger pack (as compared to Rupee 1 product's) is good because "yeh dil maange more."
Generally, low price products offer less grammage as compared to high price points. For example- let us say for Rs.5 you get 50 gms. The cost of 500 gms is not Rs.50 but slightly less than this, say Rs.45. Now since Rs.5 is more affordable, people buy more of Rs.5 unit, say, Five Lakh units of Rs.5 is sold, i.e., 250 Lakhs grammage is sold. If a customer had bought bigger pack, the cost for the customer would have been Rs.22.5 lakhs. But when he buys at low price unit of Rs.5 per 50 gms, his cost is Rs.25 lakhs. Hence, a clear profit of Rs.2,50,000.
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* Contributed by -
Mayur Mayank,
PGP-II (2004-2006),
Bharathidasan Institute of Management, Trichy.
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