Pricing objectives

Pricing is the process of translating the value of product or service into quantitative terms and adding to it the revenue a firm wants to earn after considering all the expenses occurred both in monetary and non monetary forms. Price is the outcome of pricing which is kept unchanged for a certain period of time.

Pricing considers all the factors like cost of procurement of raw materials, cost of production, cost of transportation, distribution, marketing, packaging, and sales promotion, competition, purchasing power of target market, government policies, etc.

Pricing includes setting objectives, identifying the factors governing price, formulating price policies, formulating strategies for setting prices, implementing them and controlling them.

Some of the objectives of pricing are as follow:

1. Return on investment: Main objective of pricing is that the price decided for a product should be able to bring satisfactory return on investment so that the firm gets motivation and viability to carry on the production of a product.

2. Profit maximisation: When product gets acceptance in the market firms try to maximise their profits by way of pricing by keeping the price of a product high.

3. Price stability: When the price of a product is volatile its consumers are confused therefore companies try to keep the price stable to win the confidence of consumers.

4. Under the reach of target market: This is also one of the basic objective of pricing where price of the product is kept at the level where the target market can easily afford it.

5. Social welfare: Sometimes social welfare is the objective when a company keeps the price of a product at minimum possible level so that they can serve the beneficiary. It happens mostly with generic and basic products run by some NGO or non-profit organisation working with social welfare objective.

6. Complying Government policies: In the process of pricing a product government policies for maximum price including taxes have to be kept in mind. Price of the product needs to be in compliance with the law of the land.

7. Beating competition: When a firm runs a product with the objective to beat the competition it may follow low price policy to penetrate the market and increase its market share.

8. In line with firm's objectives: In whatever stage of product of a firm be in product life cycle its pricing is directly influenced with that. It means pricing objectives are directly proportional to a firm's objectives.

9. Bringing satisfactory profits to channel partners: After a product is manufactured it reaches to its customers via different channels who are called traders or intermediaries having monetary interests. Pricing has to cater their interest and profits to sell the products to final customers.

10. Consumers' satisfaction: A product is made for the ultimate customer who uses it. Pricing of a product should be such that a consumer feels satisfaction while buying and using the product. It should not be too high that the customer feels it does not worth it and nor too low that customer feels it is of sub quality.

Marketing : Share increasing strategies

After a firm has seen growth in its business and reaped profits from it but the business has now become stagnant and growth slowed down. The business needs to expand its horizon to increase its market share to increase its profit. Some of the strategies to increase market share are as follow:

1. The firm should look at the customers it presently has as an asset and should do all the efforts to sustain them. If it tries to look out for new customers and doesn't pay attention to the present customer base then acquiring new customers is of no use as the firm still has same or even less customers as old customers have left them.

2. By the expansion of geographic area business may acquire new customers and expand its market share. They can do it by expanding their sale to new state or even new country by means of export.
3. The firm can tap new customers in the present geographic area who are not using their products by way of schemes and promotion.
4. New uses of the same product can be found out and suggested to the market via advertising like does Dettol.
5. New variants of the product can be brought for capturing different tastes and interests of customers like Colgate introduced many variants of toothpaste like colgate maxfresh, colgate total, colgate herbal, colgate active salt, etc.
6. Up-gradation in manufacturing process for manufacturing upgraded product according to the market demand helps in increasing market share.
7. Exploring new niches is always a good way to increase market share.
8. Product innovation of products in demand helps the company to stay ahead in the competition.
9. Strengthening the brand image and making it popular among customers automatically pulls the demand of products.
10. Customer relationship management helps in sustaining the current customer base and bringing new customers via word of mouth communication.
11. Brand or product promotion via advertising, contests, sponsorship, CSR, helps in increasing sale of a product.

Marketing : Brand building strategies

Branding is one of the important processes of marketing. Be it a big business or a small one branding has its say everywhere. Difference between branded and non branded goods or services can be seen and felt easily. In today's world of internet and technology as much easy it has become to communicate that much difficult it has become to be seen as committed to that communication.

Its not like once you have created or developed a brand and now rest of your life you can bank upon

Branding

that. The business has to continuously evolve its brand with time. Some of the brand building strategies are as follow:

1. Define the brand: It includes how a business sees its brand and what are the traits it want to be associated with it. How it want the consumers to look at and feel about the brand. What values of the firm they want to attach with the brand. It helps in defining the brand.

2. Composition of brand: Here the firm has to decide upon the things that present the brand to the outer world. Like brand name, logo, colour, design, music, etc.

3. Target and positioning of the brand: Once the brand is ready now here comes the step to make it open to the world and present it to the consumers. Now comes the question how to covey the values of the brand to the consumers. Advertising is one of the ways to do it but only advertising can not do the work. Business needs to show its values through its product, services and conduct.

Not only consumers but employees are also a vital part of this brand building. The conduct an organisation does with its employees is seen in their interaction with the consumers.

4. Review the brand: After the brand has been exposed to the market it needs to be reviewed periodically on the grounds of company's philosophy which may change with time, its effectiveness, its influence, the value it holds for consumers, competition, etc.

5. Reaffirm the brand: If any changes need to be incorporated it should be as business is an ongoing process and needs and wants of consumers changes with time. New demographics occur with new thinking which needs to be addressed without delay.

The brand should be relaunched with freshness and new values.

Apart from above I would like to share some new age branding strategies which I recently read in an article on www.forbes.com contributed by Glenn Llopis:

1. See consumers engagement that others don't.
2. Establish an identity that is easily relatable.
3. A lifestyle platform that inspires people and communicates hope.
4. Continuous innovation with flawless timing and execution.
5. Promote the genuine spirit of giving.
6. Serve others to leave a legacy.

For reading the article in detail you can click here.

Marketing : Brands Meaning and Role

According to American Marketing Association," A brand is a name, term, symbol or a design, or a combination of them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors."

Brands

Brands represent a product, service or company which have their values embodied in it. Like Tata is known for its strength, reliability and quality and McDonalds for quality and pocket friendly burgers. They make it easy for the company to get into the mind of its customers.

A good brand is mostly simple and short which is easy to identify like Apple if someone talking about electronics and heard the name Apple or seen its icon they know its one of the world's top most company manufacturing iphones, tablets, laptops Mac books, etc. Apple has been successfully able to make its name in the premium market.

Sometimes people themselves become a brand like Sachin Tendulkar, Aamir Khan and Amitabh Bacchan are brands themselves. Many times people go to the movie theater only by knowing the star-cast of the movie because those actors have been consistent in their performances and the choice of films they do that always entertain them and prove to be value for their money.

Brands can be read, seen, heard or felt they are the intangible assets of a company. The qualities associated with them can not be build only by advertisements the product they are representing should be able to perform on the said quality standards.

Role of Brands in marketing

Brands play a very important role in the success of a business. some of them are:

1. They help in making the product identifiable. There are so many companies selling the same product in the same market brands for them are like names given to human beings.

2. They make it easy to advertise for the product. A product with a brand name is easy to advertise and become known to people like it was easy for Rahul Gandhi to enter the politics with Gandhi surname.

3. Products with brand names becomes easily acceptable by the customers like ITC launched sunfeast biscuits under its brand and was easily accepted by the people as a good brand in biscuits.

4. It becomes easy for a company to expand its product mix under a successful brand like ITC has varied product mix tobacco, hotels, agriculture produce, soaps, biscuits, etc.

5. Brands provide an assurance of quality to the customer which saves his money and energy in researching and looking out for appropriate product which enable the company to charge a premium on price.
6. Middlemen who are involved in the business of branded goods have many advantages as they don't need to expend on advertisement and there is less risk of loss.
7. Brands pull the sale of products and thus increase the profit.
8. Brands protect fluctuation of price.
9. Consumer is satisfied after using the product of a good brand as he feels value for money.
10. Sale of the product comes automatically under the name of an accepted brand.

Marketing : Product Life Cycle (PLC)

Products also have a life cycle just like humans. They also have different stages in their life as they move forward in their journey of life.

The concept of PLC is based on following assumptions:

1. Products have a limited life.
2. Product sales passes through different stages which offer different challenges, opportunities and problems.
3. Profits rise and fall at stages of PLC.
4. Products require different strategies of marketing, human resource, finance, purchase, manufacturing, etc in different stages of its life cycle.

These different stages of life of a product can be plotted on a chart named as PLC. Where X axis represents time and Y axis represents sales and profit. Sales are always greater than the realisation of profit.

Different stages of Product Life Cycle (PLC)

Basically, PLC is a tool which allows a business  to examine the stage of its product in the market through its sales and profit in particular time period. After that it can chalk out a strategy to over come the problems faced by the product in the market. Lets have a look at the different stages of product life cycle and problems and opportunities it generally faces in that stage:

1. Introduction stage: It is the stage of introduction of product in the market. The company has to make heavy investments in order to launch and run a product in the market for the first time. Sales volume are very slow and profits are generally non existent or are negative. If a company is able to sustain and overcome it, then only it reaches the next stage.

2. Growth: If the product has been accepted by the market its sale grows rapidly and the business start making profit very steeply. There is awareness in the market about the brand and product. Product starts facing competition therefore marketing expenditure increases.

3. Maturity: After the product has seen substantial growth and reached to masses it starts facing stagnation in sales and rate of growth of  sales declines. Profits may increase or come down due to competition. The business has to make expansion and promotional strategy, offer different models of the same product, find new niche markets, offer discounts, schemes, etc to sustain in the market. This is the longest stage of PLC.

4. Decline: After the fruits of maturity has been reaped product faces huge decline in sales and its declining stage of product life cycle starts. Profits start falling severely. Competition becomes cut throat and market share start declining fast. Company may focus on only profitable markets.

At this stage business may decide to make investments in fixed assets for technology up-gradation that may revive the product and manufacture totally new kind of variants. Innovation and up-gradation may be the best strategy at this stage if the company wants to continue the product or divestment or elimination of the product is the other option.

Shortcomings of product life cycle:

Although PLC is a good tool to asses a product's future prospects and strategy it is not the only life cycle of a product. A product may show other pattern of life cycle apart from this and be unpredictable. Not all the products necessarily reach the decline phase or a product may never see a decline.

Sometimes it is difficult to asses the stage of a product, it may seem to be maturity but it may come out to be decline without passing through maturity.

Life span of different stages may be very different from this. Maturity need not always be the longest stage instead introduction stage may be the longest.

If a temporary fall in profits mistakenly taken as decline and plan for its discontinuance have been started it will lead it to decline even when actually it was not.

Marketing : Static and Dynamic understanding of BCG Matrix

BCG matrix is a growth - share matrix depicting the position of a corporation's portfolio of business units with comparison to each other on a single plot. It was developed by Bruce Henderson of Boston Consulting Group in 1970s.
                                 

BCG Growth - Share Matrix

           
This matrix considers two factors important for the growth and success of a firm one is market growth rate and another is relative market share. The matrix is plotted along these two factors. Market growth rate is the overall industry's growth rate, as much high it is that much attractive it is to be in that business. An increased market growth rate leads to consumption of cash. Relative market share is the firm's market share in comparison to the market leader in that sector. An increased market share leads to the generation of cash and it is generally a good position for a business unit to have a high market share as it is able to capitalise on its experience curve and employ cost advantages.

There are four segments on the basis of different combinations of these factors:

1. Cash Cows : This is a situation for a business unit when the market growth of its industry is low but relative market share of the firm is high. This may be a result on the product life cycle when the business had really gained a significant market share during the growth days of market and it is still able to maintain that when the market growth rate had slowed down.

It means business is consuming less funds as market growth is slow but it is generating more funds as it has dominance in the market share because of its experience in the market. And due to this the business has been able to cut its cost and being more productive in less funds.

It does not need funds for investment in fixed assets, research or mass marketing but only for operations and to target the target customers.

These kind of businesses are good as long they can survive or should be retained even if small investments needed to run it as it can fund the corporation's growing units with least attention and investment. Just giving the fruits of corporation's hard work in its old years.

2. Stars : A business unit comes under stars when both its market growth rate and relative market share are high. It means the business unit needs more funds to satisfy its need for expansion and up-gradation, fixed investments, research, marketing,etc. At the same time when its market share is increasing it is able to generate more funds from volume sales, new customer acquisition, etc. Its net profit may be even out with its funds consumption. The business is in growth stage of product life cycle.

This is the right time to invest in it by pouring in funds from the corporations' other business units which may be from cash cows or by divesting loss making units.

3. Question Marks : Some business units become question mark when they have low relative market share in highly growing market. They tend to consume more funds but lack in funds generation. These are also in the growth stage of product life cycle.

There may be some problem with the way of carrying business because if the market is growing it means the industry's other competitors are growing and they are hitting the nail at the right place. We can take the example of Nokia, it was the king of mobile handset market in India but with the inception of low price handset companies like Micromax and smart phones from Samsung it started loosing its market share even when the market growth rate was very high.

These units need more and more funds for carrying out business but even on this they do not turn out to be profitable and make losses and thus there is a question mark on them they are also called problem child.

 If the corporation's philosophy allows it may be better to chalk out the actual problem and try to solve it, it may be regarding not getting sufficient funds or some procurement, production, finance,marketing or sales related problem or sell it as Nokia sold its handset business to Microsoft.

4. Dogs : Businesses which have relatively low market share in the slowly growing market are called dogs. They neither consume much funds nor generate enough funds. This stage generally comes in the late maturity time of product life cycle when the market growth rate has slowed down.

It may not be wrong to say that we are in the wrong business as even being for a long time in the same business since its growth the business has not been able to gain sufficient market share and still struggling with profits.

Retrenchment may be the best option for these units.

Shortcomings of B.C.G matrix:

BCG matrix is not much relevant in today's scenario. As it considers only two factors market growth rate and relative market share important for taking decisions in business. There are many other factors which play important role in a business's success like no.of competitors, size of the market, sector of the business, etc.

A business unit may have very small market share in comparison to competitors but it may have complete hold on the niche it is playing in.

A corporation's all the business units need not necessarily be dependent on each other.

According to matrix when a business seems to be a dog it may in actual be a cash cow for the corporation.

Its not necessary that particular strategy is applicable to all the situations, many things also depend on corporation's philosophy and situations that whether it want to stay in the market at any cost or its objective is to make money only or to keep its presence in the market or philanthropy.

Although BCG matrix may not be so relevant in today's world but it still provides a basic tool for the understanding of business and business decision making.