sp jain pricing workshop deepak bhatia

PricingDeepak Bhatia

A little bit about me…

My work experience so far …

So What is Pricing?

Its as simple as this…

Goods or

services

Value to custom

erCustomer Price

How did we price products in P&G/Pepsi?

Parameters used• Size of the SKU – Bottle/Sachet/Packet etc• Volume per SKU – ml/Kg• Manufacturing & Packaging costs• Research & Development costs • Sales & Distribution Costs• Advertising and branding costs• Competition pricing• Incremental benefits compared to other products in the same

category• Etc etc … anything that directly or indirectly adds to the cost of the

product on a fixed or variable basis

But there was one thing we all used very effectively in India…

Affordability

“Paanch” or “Do” Rupaye or “Pachchees”

Videoshttps://youtu.be/QZWgamF8YwA

https://youtu.be/jmNrvlQ73pU

Coke

McAloo Tikki

https://youtu.be/jAKjI1kItDM Vodafone

Biggest Learning for most marketers in India was that end consumer price was defined by affordability

Lets look at Telecom

What was the price per minute when it was launched?

Clearly affordability scaled up the consumption & the subscriber base in the country

Chota Recharge to “Chutta” Recharge

But all this drove mass market consumption

What about the other segments?

In Telecom we divide our base into…• Low Value Subs• Medium Value Subs• High Value Subs• Ultra High Value Subs

Which is basically two key segments?• Mass

• Premium

Our Current Market share also defined our pricing in the relevant markets• If we were a distant #2 – Value pricing for most of the

base• If we were market leaders – premium pricing for most

of the base• If we were just a new entrant in a market – loss

leader/marginal cost pricing on certain line items

An interesting concept in Telecom• GEOGRAPHY BASED PRICING1. Home Zone – Rural vs. Urban2. Low Market share districts – differential pricing vs.

high market share districts3. College campus pricing vs. home use pricing

What are the key objectives of any company ?

• Grow Revenues

• Lower costs

• Improve profitability

The way we price can impact all the 3 key levers of any business…

Revenues ?

REVENUES

Subs

Rate Per Min

Min Of

Usage

Biggest Disruption in the telecom pricing was that of …

Per Second Billing…

Suddenly …Over 25% of Revenues on a per sub basis disappeared from the market

New Operators used this technique to gain share including companies like Du in UAE & Tata Docomo in India

Another case of disruptive pricing• Whatsapp vs. SMS

• And one about to happen – 4G at 3G prices

So what will companies look for in students like you for developing their pricing strategies

https://youtu.be/4phxRH6vk-I

How to price your product ?

Clear Skills needed…• Strong analytical skills• EXTREMELY strong database skills• Sensitivity analysis

• AND LAST BUT VERY VERY IMPORTANT SKILL

STRONG PRESENTATION SKILLS to convert large numerical data with analysis into meaningful visual charts for management to take decisions without getting into HOW the data was crunched but WHAT to do next …

Case Study - 1• You are a number 4 operator launching in a market

that is having 100% penetration of subscribers in the TOP 3 operators.• The Telecom Regulatory controls pricing decisions with

pre approvals needed before launch• You have a weaker network in rural compared to urban• The Top 3 operators have enough margins to match

your pricing instantly and sustain it till you budge• You need to hit a 10% market share in year 1 of launch

Case Study - 2• You are launching a new shampoo in the market• The Top 3 Brands occupy close to 90% share of

revenues• They are more well distributed than any other product

category of the same price points• Their Advertising muscle is 5 times that of any new

player• They have a kitty of new innovations waiting to be

introduced to attack any new comer in this category