Pricing Strategies Of Itc

Pricing Strategy ITC Foods Business Division (Staples)

                                    The FMCG & RETAIL Pricing Strategy

UNDERSTANDING THE PROCESS

FMCG Pricing Strategy is now a critical element of the management mix. Old school
management responsibilities of Sales owning the trade spend budget and customer
negotiations with marketing owning the Recommend Retail Price do not work in today's
information driven age.

Retail sales volume is now 80% controlled by 2-3 chains with a scattering of independent
operators making up the rest of the volume. This concentration means the negotiations favour
the retailer with the supplier handing over margin via the mechanism of trading terms and via
the demand for increased promotional frequencies and deep price discounts on key branded
lines.

The challenge for Trade Marketing, Category Management as well as Sales and Marketing is
to develop a pricing system that can be customized to reflect your

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business needs but utilize the power of a structured and proven pricing management system.

The Basic Concept used by ITC is:

“PRICE IS SOMETHING WHICH CUSTOMER IS READY TO PAY FOR YOUR

PRODUCT”

Hence it is a majority function of

- Consumers purchasing Power.
- Market condition created by the Competitor in terms of the Price.  
PRICING STRATEGY
Pricing is an important strategic issue because it is related to product positioning.
Furthermore, pricing affects other marketing mix elements such as product features, channel
decisions, and promotion.
While there is no single recipe to determine pricing, the following is a general sequence of
steps that are followed for developing the pricing of product:
1. Develop marketing strategy - perform marketing analysis, segmentation, targeting, and
positioning. Methods Adopted: Box Plot Method: i.e. Market Segmentation
2. Make marketing mix decisions - define the product, distribution, and promotional tactics.
3. Estimate the demand curve - understand how...
pepsi:

It was hot summer of Chennai which made me realize of this unique pricing strategy of Cola
Companies. Few days back while quenching my thirst in a local cola shop in Chennai, I
discovered how these Cola companies have strategically shift there pricing by selling 200ml
of soft-drink at the cost of 300ml. I had to quench my thirst by consuming 2 bottles huhhh!!

It was few years back when these companies come up with the concept of “Chota Pepsi” or
“Coke” for that matter. They offered consumers 150 ml of soft-drink for Rs.5. It was well
accepted by consumers who were use to drink 300 ml. At this point of time both 150 ml and
300 ml (for Rs. 9) were available in the market.

Then after some time they increased the volume and price of small bottles to 200 ml and Rs.
7, though 300 ml was at same price. These companies discovered a new trend in consumers.
They realized that still consumers prefer small bottles. This appeared as a great opportunity
for them. Bingo!! The result of this we are seeing now.

Finally, these companies are now selling same “Chota Pepsi” or “Small Coke” at the price of
“Bada” i.e. Rs. 9. And we without realizing this have happily accepted this. And the price of
pet jar i.e. 500 ml has just increased from Rs. 18 to Rs. 20, where as the prices of 1.5 liters
and 2 liters have been decreasing or is mostly with some offer like free my can or something.
300 ml bottles have almost vanished from the market now.

Hats Off to the pricing strategy of the Cola Companies who have been successfully able to
sell 66% of the product at the cost of 100% almost in a phased manner and making consumer
habitual and unaware of the increased price.